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Why Is Texas Instruments (TXN) Down 7.1% 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 lost about 7.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Texas Instruments due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Texas Instruments Beats on Q4 Earnings
Texas Instruments reported fourth-quarter 2021 earnings of $2.27 per share, which surpassed the Zacks Consensus Estimate by 16.4%. The bottom line was within management’s guidance of $1.83-$2.07 per share. Further, the figure rose 26% year over year and 9.7% sequentially.
The company reported revenues of $4.83 billion, which improved 19% from the year-ago quarter and 4.1% from the prior quarter. The top line was within management’s guidance of $4.22-$4.58 billion. Also, revenues beat the Zacks Consensus Estimate of $4.44 billion.
Top-line growth was driven by a solid demand environment across automotive and industrial end markets. Also, the growing momentum across the communication equipment and enterprise systems markets contributed well. Strong performance delivered by the Analog and Embedded Processing segments drove the results.
However, softness in the personal electronics market was concerning.
Nevertheless, the company’s efficient manufacturing strategies and continuous returns to shareholders are likely to instill investors’ optimism in the stock. Its substantial investments in growth avenues and competitive advantages are other positives.
The continuous rise in the demand for electronic components remains a major tailwind.
End-Market in Detail
Revenues in the industrial market grew 40% from the year-ago quarter, owing to a solid momentum across most sectors.
The company’s revenues generated from the automotive market grew in high-single digits from the year-ago quarter. The continuous recovery in the automotive space remained a tailwind.
Revenues in the communications equipment market increased 25% year over year.
Enterprise systems’ revenues witnessed 50% year-over-year growth, owing to the strength in data center and enterprise computing.
However, revenues from the personal electronics market were down in the upper-single digits compared to the year-ago quarter.
Segments in Detail
Analog: The company generated $3.8 billion from the segment (77.8% of total revenues), which increased 20% from the year-ago quarter.
Embedded Processing: The segment generated $764 million in revenues (15.8% of total revenues), up 6% year over year.
Other: Revenues in the segment were $310 million (6.4% of total revenues). The figure was up 35% from the prior-year quarter.
Operating Details
Texas Instruments’ gross margin of 69.3% expanded 440 basis points (bps) from the year-ago quarter.
As a percentage of revenues; selling, general and administrative expenses contracted 140 bps year over year to $404 million in the reported quarter.
Research and development expenses of $389 million contracted 140 bps from the year-ago quarter as a percentage of revenues.
The operating margin was 51.8%, which expanded 730 bps from the prior-year quarter.
Balance Sheet & Cash Flow
As of Dec 31, 2021, the cash and short-term investment balance was $9.7 billion compared with $9.8 billion as of Sep 30, 2021.
At the end of the reported quarter, the company had long-term debt of $7.24 billion compared with $7.23 billion in the prior quarter.
Current debt was $500 million in the fourth quarter, the same as that in the third quarter.
The company generated $2.36 billion of cash from operations, down from $2.42 billion in the previous quarter.
Capex was $1.3 billion in the reported quarter. Further, free cash flow stood at $1.1 billion.
Texas Instruments paid out dividends worth $1.1 billion in the reported quarter. The company repurchased shares worth $142 million.
Guidance
For first-quarter 2022, Texas Instruments expects revenues between $4.5 billion and $4.9 billion. Earnings are expected to be $2.01-$2.29 per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
The consensus estimate has shifted 15.47% due to these changes.
VGM Scores
Currently, Texas Instruments has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. 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) Down 7.1% Since Last Earnings Report?
It has been about a month since the last earnings report for Texas Instruments (TXN - Free Report) . Shares have lost about 7.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Texas Instruments due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Texas Instruments Beats on Q4 Earnings
Texas Instruments reported fourth-quarter 2021 earnings of $2.27 per share, which surpassed the Zacks Consensus Estimate by 16.4%. The bottom line was within management’s guidance of $1.83-$2.07 per share. Further, the figure rose 26% year over year and 9.7% sequentially.
The company reported revenues of $4.83 billion, which improved 19% from the year-ago quarter and 4.1% from the prior quarter. The top line was within management’s guidance of $4.22-$4.58 billion. Also, revenues beat the Zacks Consensus Estimate of $4.44 billion.
Top-line growth was driven by a solid demand environment across automotive and industrial end markets. Also, the growing momentum across the communication equipment and enterprise systems markets contributed well. Strong performance delivered by the Analog and Embedded Processing segments drove the results.
However, softness in the personal electronics market was concerning.
Nevertheless, the company’s efficient manufacturing strategies and continuous returns to shareholders are likely to instill investors’ optimism in the stock. Its substantial investments in growth avenues and competitive advantages are other positives.
The continuous rise in the demand for electronic components remains a major tailwind.
End-Market in Detail
Revenues in the industrial market grew 40% from the year-ago quarter, owing to a solid momentum across most sectors.
The company’s revenues generated from the automotive market grew in high-single digits from the year-ago quarter. The continuous recovery in the automotive space remained a tailwind.
Revenues in the communications equipment market increased 25% year over year.
Enterprise systems’ revenues witnessed 50% year-over-year growth, owing to the strength in data center and enterprise computing.
However, revenues from the personal electronics market were down in the upper-single digits compared to the year-ago quarter.
Segments in Detail
Analog: The company generated $3.8 billion from the segment (77.8% of total revenues), which increased 20% from the year-ago quarter.
Embedded Processing: The segment generated $764 million in revenues (15.8% of total revenues), up 6% year over year.
Other: Revenues in the segment were $310 million (6.4% of total revenues). The figure was up 35% from the prior-year quarter.
Operating Details
Texas Instruments’ gross margin of 69.3% expanded 440 basis points (bps) from the year-ago quarter.
As a percentage of revenues; selling, general and administrative expenses contracted 140 bps year over year to $404 million in the reported quarter.
Research and development expenses of $389 million contracted 140 bps from the year-ago quarter as a percentage of revenues.
The operating margin was 51.8%, which expanded 730 bps from the prior-year quarter.
Balance Sheet & Cash Flow
As of Dec 31, 2021, the cash and short-term investment balance was $9.7 billion compared with $9.8 billion as of Sep 30, 2021.
At the end of the reported quarter, the company had long-term debt of $7.24 billion compared with $7.23 billion in the prior quarter.
Current debt was $500 million in the fourth quarter, the same as that in the third quarter.
The company generated $2.36 billion of cash from operations, down from $2.42 billion in the previous quarter.
Capex was $1.3 billion in the reported quarter. Further, free cash flow stood at $1.1 billion.
Texas Instruments paid out dividends worth $1.1 billion in the reported quarter. The company repurchased shares worth $142 million.
Guidance
For first-quarter 2022, Texas Instruments expects revenues between $4.5 billion and $4.9 billion. Earnings are expected to be $2.01-$2.29 per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
The consensus estimate has shifted 15.47% due to these changes.
VGM Scores
Currently, Texas Instruments has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. 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.