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Why Is Texas Instruments (TXN) Up 3.6% Since Last Earnings Report?
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It has been about a month since the last earnings report for Texas Instruments (TXN - Free Report) . Shares have added about 3.6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Texas Instruments due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Texas Instruments Beats on Q1 Earnings
Texas Instruments reported first-quarter 2021 earnings of $1.87 per share, which surpassed the Zacks Consensus Estimate by 19.9%. The bottom line also surpassed management’s guidance of $1.44-$1.66 per share.
Further, the figure increased 51% year over year and 3.9% sequentially.
The company reported revenues of $4.3 billion, which beat the Zacks Consensus Estimate of $3.9 billion. The top line also comfortably surpassed the management’s guidance of $3.79-$4.11 billion.
Further, the top-line figure improved 29% from the year-ago quarter and 5.2% from the prior quarter.
Top-line growth was driven by improving end-market conditions. Solid demand in the personal electronics and industrial market, and strong recovery in the automotive market remained major tailwinds. Further, the strong performance delivered by the Analog and Embedded Processing segments contributed well.
However, softness in the enterprise systems market was an overhang in the reported quarter.
Nevertheless, the company’s efficient manufacturing strategies and continuous returns to shareholders remain tailwinds.
Further, the uptrend in personal electronics, owing to the rising demand for electronic gadgets for remote working and entertainment amid the pandemic, is likely to benefit the company in the days ahead.
Also, its strong investments in new growth avenues and competitive advantages are the positives.
End-Market in Detail
The continued rebound in the automotive space led to 25% growth in revenues of the company from this end-market on a year-over-year basis.
Further, revenues in the industrial market grew 30% from the year-ago quarter, owing to solid momentum across most sectors.
Additionally, strong traction of the company across major sectors led to year-over-year growth of 50% in the company’s revenues from the personal electronics market in the reported quarter.
Meanwhile, revenues in the communications equipment market remained flat year over year.
Furthermore, enterprise systems’ revenues were down 10% on a year-over-year basis.
Segments in Detail
Analog: The company generated $3.3 billion from the segment (76.5% of total revenues), which increased 33% from the year-ago quarter.
Embedded Processing: The segment generated $767 million in revenues (17.9% of total revenues), up 17% year over year.
Other: Revenues in the segment were $242 million (5.6% of total revenues). The figure was up 12% from the prior-year quarter.
Operating Details
Texas Instruments’ gross margin of 65.2% expanded 250 basis points (bps) from the year-ago quarter.
As a percentage of revenues, selling, general and administrative expenses contracted 260 bps year over year to $425 million in the reported quarter.
Further, research and development expenses of $386 million contracted 240 bps from the year-ago quarter as a percentage of revenues.
Operating margin was 45.2%, which expanded 780 bps from the prior-year quarter.
Balance Sheet & Cash Flow
As of Mar 31, 2021, the cash and short-term investment balance was $6.7 billion, which increased from $6.6 billion as of Dec 31, 2020.
At the end of the reported quarter, the company had long-term debt of $6.25 billion, up from $6.24 billion in the prior quarter.
Current debt was nil compared with $550 million in the previous quarter.
The company generated $1.9 billion of cash from operations, down from $2.1 billion in the previous quarter.
Capex was $308 million in the first quarter. Further, free cash flow stood at $1.5 billion.
Additionally, Texas Instruments paid out dividends worth $940 million in the reported quarter. Further, the company repurchased shares worth $100 million.
Guidance
For second-quarter 2021, Texas Instruments expects revenues between $4.13 billion and $4.47 billion. Further, earnings are expected to be $1.68-$1.92 per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 7.52% due to these changes.
VGM Scores
At this time, Texas Instruments has an average Growth Score of C, a grade with the same score on the momentum front. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Texas Instruments has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Why Is Texas Instruments (TXN) Up 3.6% Since Last Earnings Report?
It has been about a month since the last earnings report for Texas Instruments (TXN - Free Report) . Shares have added about 3.6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Texas Instruments due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Texas Instruments Beats on Q1 Earnings
Texas Instruments reported first-quarter 2021 earnings of $1.87 per share, which surpassed the Zacks Consensus Estimate by 19.9%. The bottom line also surpassed management’s guidance of $1.44-$1.66 per share.
Further, the figure increased 51% year over year and 3.9% sequentially.
The company reported revenues of $4.3 billion, which beat the Zacks Consensus Estimate of $3.9 billion. The top line also comfortably surpassed the management’s guidance of $3.79-$4.11 billion.
Further, the top-line figure improved 29% from the year-ago quarter and 5.2% from the prior quarter.
Top-line growth was driven by improving end-market conditions. Solid demand in the personal electronics and industrial market, and strong recovery in the automotive market remained major tailwinds. Further, the strong performance delivered by the Analog and Embedded Processing segments contributed well.
However, softness in the enterprise systems market was an overhang in the reported quarter.
Nevertheless, the company’s efficient manufacturing strategies and continuous returns to shareholders remain tailwinds.
Further, the uptrend in personal electronics, owing to the rising demand for electronic gadgets for remote working and entertainment amid the pandemic, is likely to benefit the company in the days ahead.
Also, its strong investments in new growth avenues and competitive advantages are the positives.
End-Market in Detail
The continued rebound in the automotive space led to 25% growth in revenues of the company from this end-market on a year-over-year basis.
Further, revenues in the industrial market grew 30% from the year-ago quarter, owing to solid momentum across most sectors.
Additionally, strong traction of the company across major sectors led to year-over-year growth of 50% in the company’s revenues from the personal electronics market in the reported quarter.
Meanwhile, revenues in the communications equipment market remained flat year over year.
Furthermore, enterprise systems’ revenues were down 10% on a year-over-year basis.
Segments in Detail
Analog: The company generated $3.3 billion from the segment (76.5% of total revenues), which increased 33% from the year-ago quarter.
Embedded Processing: The segment generated $767 million in revenues (17.9% of total revenues), up 17% year over year.
Other: Revenues in the segment were $242 million (5.6% of total revenues). The figure was up 12% from the prior-year quarter.
Operating Details
Texas Instruments’ gross margin of 65.2% expanded 250 basis points (bps) from the year-ago quarter.
As a percentage of revenues, selling, general and administrative expenses contracted 260 bps year over year to $425 million in the reported quarter.
Further, research and development expenses of $386 million contracted 240 bps from the year-ago quarter as a percentage of revenues.
Operating margin was 45.2%, which expanded 780 bps from the prior-year quarter.
Balance Sheet & Cash Flow
As of Mar 31, 2021, the cash and short-term investment balance was $6.7 billion, which increased from $6.6 billion as of Dec 31, 2020.
At the end of the reported quarter, the company had long-term debt of $6.25 billion, up from $6.24 billion in the prior quarter.
Current debt was nil compared with $550 million in the previous quarter.
The company generated $1.9 billion of cash from operations, down from $2.1 billion in the previous quarter.
Capex was $308 million in the first quarter. Further, free cash flow stood at $1.5 billion.
Additionally, Texas Instruments paid out dividends worth $940 million in the reported quarter. Further, the company repurchased shares worth $100 million.
Guidance
For second-quarter 2021, Texas Instruments expects revenues between $4.13 billion and $4.47 billion. Further, earnings are expected to be $1.68-$1.92 per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 7.52% due to these changes.
VGM Scores
At this time, Texas Instruments has an average Growth Score of C, a grade with the same score on the momentum front. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Texas Instruments has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.