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Texas Instruments (TXN) Up 8.6% Since Last Earnings Report: Can It Continue?
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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 8.6% in that time frame, underperforming 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 Q3 Earnings & Revenues Miss, Down Y/Y
Texas Instruments reported third-quarter 2023 earnings of $1.85 per share. The figure was near the higher end of management’s guided range of $1.68-$1.92.
However, the figure declined 25% year over year and 1.1% sequentially.
The bottom line includes a benefit of 5 cents, excluding which the figure is at $1.80.
TXN reported revenues of $4.53 billion, which came within the management’s guidance of $4.36-$4.74 billion.
Revenues decreased 14% from the year-ago quarter’s level while slightly improving by 0.02% sequentially.
The year-over-year decline was attributed to weakness across various end markets. The company witnessed sluggishness in its Analog and Other segments.
On the other hand, the Embedded Processing segment delivered improved performance on a year-over-year basis.
On a sequential basis, Texas Instruments suffered from widespread weakness in the industrial and communication equipment markets.
Nevertheless, it experienced sequential growth in the automotive end market, which remains a positive. TXN also experienced an improvement in the personal electronics and enterprise systems markets from the prior quarter.
We note that Texas Instruments’ efficient manufacturing strategies and consistent returns to shareholders are likely to instill investors’ optimism in the stock. Its substantial investments in growth avenues and competitive advantages are other positives.
Segments in Detail
Analog: Revenues of $3.35 billion were generated from the segment (74% of total revenues), down 16% from the year-ago quarter’s level.
Embedded Processing: Revenues amounted to $890 million (19.6% of total revenues), up 8% year over year.
Other: Revenues totaled $289 million (6.4% of total revenues). The figure was down 32% from the prior-year quarter’s level.
Operating Details
Texas Instruments’ gross margin of 62.1% contracted 690 basis points (bps) from the year-ago quarter’s level.
As a percentage of revenues, selling, general and administrative expenses expanded 170 bps year over year to $452 million in the reported quarter.
Research and development expenses of $471 million expanded 220 bps from the year-ago quarter’s level as a percentage of revenues.
The operating margin was 41.7%, which contracted 940 bps from the prior-year quarter’s number.
Balance Sheet & Cash Flow
As of Sep 30, 2023, the cash and short-term investment balance was $8.95 billion compared with $9.55 billion as of Jun 30, 2023.
At the end of the reported quarter, TXN had a long-term debt of $10.922 billion compared with $10.920 billion in the prior quarter.
Current debt was $300 million, down from $299 million at the end of second-quarter 2023.
Texas Instruments generated $1.94 billion of cash from operations, up from $1.39 billion in the previous quarter.
Capex was $1.49 billion in the reported quarter and free cash flow was $442 million.
Texas Instruments paid out dividends worth $1.13 billion in the reported quarter. It repurchased shares worth 46 million.
Guidance
For fourth-quarter 2023, Texas Instruments expects revenues between $3.93 billion and $4.27 billion.
The company expects earnings within $1.35-$1.57 per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -18.2% due to these changes.
VGM Scores
Currently, Texas Instruments has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Texas Instruments has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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Texas Instruments (TXN) Up 8.6% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Texas Instruments (TXN - Free Report) . Shares have added about 8.6% in that time frame, underperforming 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 Q3 Earnings & Revenues Miss, Down Y/Y
Texas Instruments reported third-quarter 2023 earnings of $1.85 per share. The figure was near the higher end of management’s guided range of $1.68-$1.92.
However, the figure declined 25% year over year and 1.1% sequentially.
The bottom line includes a benefit of 5 cents, excluding which the figure is at $1.80.
TXN reported revenues of $4.53 billion, which came within the management’s guidance of $4.36-$4.74 billion.
Revenues decreased 14% from the year-ago quarter’s level while slightly improving by 0.02% sequentially.
The year-over-year decline was attributed to weakness across various end markets. The company witnessed sluggishness in its Analog and Other segments.
On the other hand, the Embedded Processing segment delivered improved performance on a year-over-year basis.
On a sequential basis, Texas Instruments suffered from widespread weakness in the industrial and communication equipment markets.
Nevertheless, it experienced sequential growth in the automotive end market, which remains a positive. TXN also experienced an improvement in the personal electronics and enterprise systems markets from the prior quarter.
We note that Texas Instruments’ efficient manufacturing strategies and consistent returns to shareholders are likely to instill investors’ optimism in the stock. Its substantial investments in growth avenues and competitive advantages are other positives.
Segments in Detail
Analog: Revenues of $3.35 billion were generated from the segment (74% of total revenues), down 16% from the year-ago quarter’s level.
Embedded Processing: Revenues amounted to $890 million (19.6% of total revenues), up 8% year over year.
Other: Revenues totaled $289 million (6.4% of total revenues). The figure was down 32% from the prior-year quarter’s level.
Operating Details
Texas Instruments’ gross margin of 62.1% contracted 690 basis points (bps) from the year-ago quarter’s level.
As a percentage of revenues, selling, general and administrative expenses expanded 170 bps year over year to $452 million in the reported quarter.
Research and development expenses of $471 million expanded 220 bps from the year-ago quarter’s level as a percentage of revenues.
The operating margin was 41.7%, which contracted 940 bps from the prior-year quarter’s number.
Balance Sheet & Cash Flow
As of Sep 30, 2023, the cash and short-term investment balance was $8.95 billion compared with $9.55 billion as of Jun 30, 2023.
At the end of the reported quarter, TXN had a long-term debt of $10.922 billion compared with $10.920 billion in the prior quarter.
Current debt was $300 million, down from $299 million at the end of second-quarter 2023.
Texas Instruments generated $1.94 billion of cash from operations, up from $1.39 billion in the previous quarter.
Capex was $1.49 billion in the reported quarter and free cash flow was $442 million.
Texas Instruments paid out dividends worth $1.13 billion in the reported quarter. It repurchased shares worth 46 million.
Guidance
For fourth-quarter 2023, Texas Instruments expects revenues between $3.93 billion and $4.27 billion.
The company expects earnings within $1.35-$1.57 per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -18.2% due to these changes.
VGM Scores
Currently, Texas Instruments has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Texas Instruments has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.