NXP Semiconductors (NXPI) is expected to report better-than-expected Q1 results on Monday, with further strength seen in the second-quarter outlook, Oppenheimer said.

"We see upside to consensus 1Q sales/EPS [$2.8 billion/$2.60] and 2Q outlook [$2.9 billion/$2.66]," the firm said Wednesday in a Q1 preview, citing early signs of recovery in the auto and industrial markets, which appear to be in the early stages of a cyclical recovery.

Channel inventories are broadly normal if not lean, which should support near-term stability, according to the note.

While the auto segment, which accounts for 58% of sales, is expected to decline 5% sequentially in Q1, Oppenheimer sees NXP as "well positioned" for longer-term growth, driven by increasing vehicle content and market share.

Key contributors to this growth include automotive processors, radar systems, battery management systems, and Ethernet connectivity-all of which are expected to generate several billion dollars in 2024 revenue.

While near-term visibility remains clouded by tariffs, Oppenheimer believes customer pull-ins ahead of potential policy changes should support first-half results. A slowdown could follow in the second half.

Gross margin is expected to bottom in the quarter, with utilization currently around 70% and margins near 56%. The firm sees improved factory utilization as key to gross margin expansion over time.

Oppenheimer maintained an outperform rating and $250 price target on the stock.

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