How Key Analyst Views NXP Semiconductors After the Freescale Close

This week there has been a large amount of merger and acquisitions activity in the market, but ultimately the market has not really taken to it. This seems to be the case with NXP Semiconductors N.V. (NASDAQ: NXPI). Earlier in the week NXP announced the closing of its Freescale acquisition, and a key analyst decided to weigh in on it.

The new NXP is one of the best deleveraging/financial engineering stories in semiconductors, in Oppenheimer’s view, ideally positioned to benefit from continued auto semi content/growth, among other trends.

This announcement lacked a detailed combined financial update, which was somewhat surprising considering recent disappointing fourth-quarter guidance from both companies. However, NXP did reiterate its commitment to achieving $200 million of annual synergies in the 2016 calendar year and continues to see a “clear path” to $500 million over time.

Oppenheimer reiterated an Outperform rating for NXP with a $100 price target. At the same time, the firm set its calendar 2016 and 2017 earnings per share (EPS) estimates at $5.40 and $7.10, respectively.
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The firm detailed in its report:

NXP is now the No. 1 auto semi supplier in the world, with 35%-plus automotive exposure (Auto represented 25% of legacy NXP sales and 45% of FSL sales). We see multiple cross-selling opportunities as NXP’s keyless entry, infotainment, and connectivity dominance complement FSL’s dominant share in powertrain, emissions, ABS and sensors. We also highlight the opportunity to leverage respective regional strengths.

In the same release, NXP announced that it had closed the $1.8 billion cash sale of its RFPA business to JAC Capital. The company expects to receive the proceeds from the sale later in the month, as it awaits the required regulatory filings for cross-border transfers of funds from China.

So far in 2015, NXP has outperformed the market, with the stock up over 15% year to date. Over the past 52 weeks, the stock is up nearly 18%.

Shares of NXP were trading down over 2% at $86.32 Friday, with a consensus analyst price target of $106.04 and a 52-week trading range of $70.35 to $114.00.