Semiconductor industry sees downturn Citi cuts earnings estimates for NXPI (US) and other companies
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Update time : 2022-10-17 09:55:34
Citi recently issued a research note lowering its 2022 and 2023 earnings estimates for NXP (NXPI.US), Texas Instruments (TXN.US) and Microchip Technology (MCHP.US), with Citi noting that orders for these companies are being cancelled.
Citi analyst Atif Malik said weak demand, especially in Europe, combined with high inventories, led to the decline of ADENO (ADI.US) in July, and now other companies are starting to suffer as well. Malik said, "We expect both NXP and Texas Instruments to report weak order results, and we reiterate our view that this is just the beginning of the downturn, which will be felt by every company/every end market." Malik added that Microchip will likely continue to feel the weakness as it has the longest lead times. Malik added that ADN remains a top pick for the company due to its "defensive nature" but warned that the Philadelphia Semiconductor Index could continue to hit new lows "as the downturn gains momentum and forecasts are revised down." Malik revised his 2022 earnings estimates for Microchip, raising the company's earnings per share for this year to $5.50 from $5.43 previously. However, Citi expects Microchip to earn US$4.06 per share next year, down from its previous estimate of US$5.51. Malik now expects NXP to earn $9.49 per share in 2023, down from a previous estimate of $12.48. Malik expects Texas Instruments to earn $7.72 per share in 2023, up slightly from a previous estimate of $7.70. Analysts also expect two of the semiconductor industry's strongest sectors - automotive and data centres - to take a hit next, with cancellations in these markets within "1-2 quarters". Malik added that there are three signs pointing to a possible bottom in the first half of 2023, including falling expectations, capital expenditure cuts and "near-trough valuations".
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