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Soft Embedded Demand Hurts TXN's Q4 Revenues: How to Play the Stock?
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Texas Instruments Incorporated (TXN - Free Report) reported its fourth-quarter 2024 results, showcasing a mixed performance. While the company exceeded earnings and revenue expectations, its year-over-year decline underscored challenges in its Embedded Processing segment, a critical growth driver.
Find the latest earnings estimates and surprises on Zacks Earnings Calendar.
TXN’s Q4 Performance Highlights
Texas Instruments delivered earnings of $1.30 per share in the fourth quarter, surpassing the Zacks Consensus Estimate by 11 cents but marking a 12.8% decline from the prior year. Revenues of $4.01 billion also topped consensus expectations by $136 million but fell 1.7% year over year.
This decline was largely attributed to a significant weakness in the Embedded Processing segment, which accounted for 15.3% of total revenues. While Embedded Processing revenues of $613 million beat estimates of $576 million, they declined a sharp 18% year over year, highlighting ongoing softness in demand.
Texas Instruments Incorporated Price, Consensus and EPS Surprise
Texas Instruments Embedded Processing performance in the fourth quarter of 2024 reflects several underlying challenges. This segment faced a cyclical downturn exacerbated by weakened demand across key end markets, particularly in industrial applications.
One significant factor was the underutilization of the Lehi factory, which supports a large portion of the Embedded Processing business. Reduced factory loadings, aimed at managing inventory levels, put downward pressure on revenues and margins. Management confirmed that lower capacity utilization disproportionately impacted the profitability of Embedded Processing, further underscoring operational inefficiencies during the quarter.
Additionally, broader macroeconomic challenges contributed to weaker customer demand. Industrial automation and energy infrastructure markets, key consumers of embedded technologies, struggled to find a bottom, impacting revenue visibility. The slow recovery in global demand for electronics and embedded systems weighed heavily on this segment.
While Texas Instruments continues to invest in expanding its Embedded portfolio and transitioning manufacturing operations to in-house facilities, these efforts are still in progress. As a result, the Embedded Processing segment remains in a transitional phase, making it particularly vulnerable to cyclical pressures and operational constraints in the near term.
On a positive note, Texas Instruments’ Analog segment, which represents the bulk of its revenues (79.2%), grew 2% year over year in the fourth quarter. This recovery follows eight consecutive quarters of declines, demonstrating resilience in the face of industry-wide challenges.
Margin Pressures and Guidance Signal Caution for TXN
Gross profit for the fourth quarter came in at $2.31 billion, representing 58% of revenues. This marked a contraction of 200 basis points in gross margin on a year-over-year basis due to lower factory utilization, higher depreciation costs and reduced revenues.
For the first quarter of 2025, Texas Instruments expects revenues in the range of $3.74 billion to $4.06 billion and earnings per share between 94 cents and $1.16. These projections point to continued near-term challenges, particularly in the industrial and automotive markets, which show no clear signs of recovery.
Following Texas Instruments’ fourth-quarter results announcement, the Zacks Consensus Estimate has witnessed sharp downward earnings estimate revisions for the first quarter and full year 2025. The consensus mark for the first quarter earnings has been revised downward by 8 cents to $1.08 per share. Similarly, for the full year 2025, it has declined to $5.59 from $5.72 per share 30 days ago.
This pessimism about Texas Instruments’ near-term prospects has dragged down the share price of the company. The stock plunged 7.5% last Friday. Over the past year, TXN has soared 11.7%, underperforming the Zacks Semiconductor – General industry’s gain of 97.4%. Compared to industry peers, the stock has outperformed Intel (INTC - Free Report) but lagged behind NVIDIA (NVDA - Free Report) and Amtech Systems (ASYS - Free Report) .
Over the past year, shares of NVIDIA and Amtech Systems have soared 128.3% and 25.3%, respectively. Intel shares have plunged 52.5% over the same time frame.
Conclusion: Sell TXN Stock for Now
Texas Instruments’ fourth-quarter results underscore a challenging environment, with its Embedded Processing segment dragging overall performance. While its Analog segment shows resilience and long-term investments in manufacturing capacity promise growth, near-term headwinds remain significant.
The company’s cautious guidance, along with ongoing weakness in critical markets, highlights potential risks. Therefore, it is prudent for investors to stay away from investing in this stock until broader recovery signs emerge in its key segments. Currently, TXN carries a Zacks Rank #4 (Sell).
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Soft Embedded Demand Hurts TXN's Q4 Revenues: How to Play the Stock?
Texas Instruments Incorporated (TXN - Free Report) reported its fourth-quarter 2024 results, showcasing a mixed performance. While the company exceeded earnings and revenue expectations, its year-over-year decline underscored challenges in its Embedded Processing segment, a critical growth driver.
Find the latest earnings estimates and surprises on Zacks Earnings Calendar.
TXN’s Q4 Performance Highlights
Texas Instruments delivered earnings of $1.30 per share in the fourth quarter, surpassing the Zacks Consensus Estimate by 11 cents but marking a 12.8% decline from the prior year. Revenues of $4.01 billion also topped consensus expectations by $136 million but fell 1.7% year over year.
This decline was largely attributed to a significant weakness in the Embedded Processing segment, which accounted for 15.3% of total revenues. While Embedded Processing revenues of $613 million beat estimates of $576 million, they declined a sharp 18% year over year, highlighting ongoing softness in demand.
Texas Instruments Incorporated Price, Consensus and EPS Surprise
Texas Instruments Incorporated price-consensus-eps-surprise-chart | Texas Instruments Incorporated Quote
Embedded Processing: A Drag on TXN’s Growth
Texas Instruments Embedded Processing performance in the fourth quarter of 2024 reflects several underlying challenges. This segment faced a cyclical downturn exacerbated by weakened demand across key end markets, particularly in industrial applications.
One significant factor was the underutilization of the Lehi factory, which supports a large portion of the Embedded Processing business. Reduced factory loadings, aimed at managing inventory levels, put downward pressure on revenues and margins. Management confirmed that lower capacity utilization disproportionately impacted the profitability of Embedded Processing, further underscoring operational inefficiencies during the quarter.
Additionally, broader macroeconomic challenges contributed to weaker customer demand. Industrial automation and energy infrastructure markets, key consumers of embedded technologies, struggled to find a bottom, impacting revenue visibility. The slow recovery in global demand for electronics and embedded systems weighed heavily on this segment.
While Texas Instruments continues to invest in expanding its Embedded portfolio and transitioning manufacturing operations to in-house facilities, these efforts are still in progress. As a result, the Embedded Processing segment remains in a transitional phase, making it particularly vulnerable to cyclical pressures and operational constraints in the near term.
On a positive note, Texas Instruments’ Analog segment, which represents the bulk of its revenues (79.2%), grew 2% year over year in the fourth quarter. This recovery follows eight consecutive quarters of declines, demonstrating resilience in the face of industry-wide challenges.
Margin Pressures and Guidance Signal Caution for TXN
Gross profit for the fourth quarter came in at $2.31 billion, representing 58% of revenues. This marked a contraction of 200 basis points in gross margin on a year-over-year basis due to lower factory utilization, higher depreciation costs and reduced revenues.
For the first quarter of 2025, Texas Instruments expects revenues in the range of $3.74 billion to $4.06 billion and earnings per share between 94 cents and $1.16. These projections point to continued near-term challenges, particularly in the industrial and automotive markets, which show no clear signs of recovery.
Following Texas Instruments’ fourth-quarter results announcement, the Zacks Consensus Estimate has witnessed sharp downward earnings estimate revisions for the first quarter and full year 2025. The consensus mark for the first quarter earnings has been revised downward by 8 cents to $1.08 per share. Similarly, for the full year 2025, it has declined to $5.59 from $5.72 per share 30 days ago.
This pessimism about Texas Instruments’ near-term prospects has dragged down the share price of the company. The stock plunged 7.5% last Friday. Over the past year, TXN has soared 11.7%, underperforming the Zacks Semiconductor – General industry’s gain of 97.4%. Compared to industry peers, the stock has outperformed Intel (INTC - Free Report) but lagged behind NVIDIA (NVDA - Free Report) and Amtech Systems (ASYS - Free Report) .
Over the past year, shares of NVIDIA and Amtech Systems have soared 128.3% and 25.3%, respectively. Intel shares have plunged 52.5% over the same time frame.
Conclusion: Sell TXN Stock for Now
Texas Instruments’ fourth-quarter results underscore a challenging environment, with its Embedded Processing segment dragging overall performance. While its Analog segment shows resilience and long-term investments in manufacturing capacity promise growth, near-term headwinds remain significant.
The company’s cautious guidance, along with ongoing weakness in critical markets, highlights potential risks. Therefore, it is prudent for investors to stay away from investing in this stock until broader recovery signs emerge in its key segments. Currently, TXN carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.