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Texas Instruments (TXN) Q2 Earnings In Line, Revenues Beat
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Texas Instruments’ (TXN - Free Report) second-quarter 2018 earnings of $1.37 per share were in line with the Zacks Consensus Estimate. Earnings increased 33% year over year and 14% sequentially.
Revenues of $4.02 billion beat the Zacks Consensus EstTexas Instruments (TXN - Free Report) Q2 Earnings In Line, Revenues Beatimate of $3.95 billion, up 8.8% on a year-over-year basis and 6% sequentially. Also, revenues came within the guided range of $3.78-$4.10 billion, driven by strong demand for Analog and Embedded Processing products in the auto and industrial markets.
Notably, Texas Instruments’ shares have rallied 41% in the past 12-month period, underperforming its industry’s growth of 48.8%.
Segment wise, growth of analog and embedded processing applications business was strong. These typically yield a more stable business as well as strong margins. The Other segment declined year over year.
Texas Instruments continues to prudently invest its R&D dollars in several high-margin, high-growth areas of the analog and embedded processing markets. This is gradually expanding its exposure in industrial and automotive markets, while reducing the same in volatile consumer/computing markets, as well as increasing dollar content at customers.
Internally, the company has always executed rather well. It, along with chipmaker Intel, is one of the few semiconductor companies that depend on internal capacity for manufacturing bulk of its devices. Since the company usually builds capacity well ahead of demand, it is able to make opportunistic purchases. As a result, the company is able to contain capex at up to 4% of sales, even while expanding business.
The company remains focused on increasing its free cash flow per share and strengthening competitive advantages. Overall, we remain optimistic about its compelling product line, differentiation in business and manufacturing efficiencies that include growing 300-millimeter Analog output. However, risks associated with a high debt level persist.
Let’s delve deeper into the numbers.
Revenues in Detail
Analog, Embedded Processing and Other segments generated 67%, 23% and 10% of quarterly revenues, respectively.
Analog, which includes Power, Signal Chain and High Volume products, was up 12% from the year-ago quarter to $2.7 billion. The year-over-year growth was driven by strong performance in the product lines — power and signal chain.
The Embedded Processing segment, which includes Connected Microcontrollers and Processors, was up 9% year over year to $943 million. The year-over-year growth was driven by stronger sales across both the product lines — processors and connected microcontrollers.
The Other segment, which includes DLPs, custom ASICs and calculators, was down 7% from the prior-year quarter to $384 million.
Margins
Texas Instruments’ gross margin of 65.2% was up 62 basis points (bps) sequentially and 91 bps from the year-ago quarter. The company’s gross margin has been improving consistently with more production shifts to its 300 mm line.
Operating expenses of $825 million were up 1.6% from a year ago. Operating margin was 42.6%, up 250 bps from the year-ago quarter.
Balance Sheet and Cash Flow
Cash and short-term investments balance was$5.1 billion compared with $4.1 billion in the last reported quarter.
The company generated $1.8 billion in cash from operations, spending $249 million on capex, $1.02 billion on share repurchases and $606 million on cash dividends. Free cash flow at the end of the second quarter was $5.7 billion.
At the end of the quarter, it had long-term debt of $5.1 billion.
Guidance
The company provided guidance for the third quarter.
It expects revenues between $4.11 billion and $4.45billion (up 7% sequentially at the midpoint of the guided range). The Zacks Consensus Estimate for third-quarter revenues is pegged at $4.25 billion.
Earnings for the quarter are expected in the range of $1.41-$1.63 per share. The Zacks Consensus Estimate for third-quarter earnings is pegged at $1.48. The guidance includes an estimated $10 million discrete tax benefit.
Texas Instruments Incorporated Price, Consensus and EPS Surprise
Currently, Texas Instruments carries a Zacks Rank #2 (Buy). Other top-ranked stocks in the same industry include Groupon (GRPN - Free Report) , IAC/InterActiveCorp (IAC - Free Report) and Facebook . While Groupon and IAC/InterActiveCorp sport a Zacks Rank #1 (Strong Buy), Facebook holds a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth for Groupon, IAC/InterActiveCorp and Facebook is currently projected to be 3%, 7.5% and 24.4%, respectively.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
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Texas Instruments (TXN) Q2 Earnings In Line, Revenues Beat
Texas Instruments’ (TXN - Free Report) second-quarter 2018 earnings of $1.37 per share were in line with the Zacks Consensus Estimate. Earnings increased 33% year over year and 14% sequentially.
Revenues of $4.02 billion beat the Zacks Consensus EstTexas Instruments (TXN - Free Report) Q2 Earnings In Line, Revenues Beatimate of $3.95 billion, up 8.8% on a year-over-year basis and 6% sequentially. Also, revenues came within the guided range of $3.78-$4.10 billion, driven by strong demand for Analog and Embedded Processing products in the auto and industrial markets.
Notably, Texas Instruments’ shares have rallied 41% in the past 12-month period, underperforming its industry’s growth of 48.8%.
Segment wise, growth of analog and embedded processing applications business was strong. These typically yield a more stable business as well as strong margins. The Other segment declined year over year.
Texas Instruments continues to prudently invest its R&D dollars in several high-margin, high-growth areas of the analog and embedded processing markets. This is gradually expanding its exposure in industrial and automotive markets, while reducing the same in volatile consumer/computing markets, as well as increasing dollar content at customers.
Internally, the company has always executed rather well. It, along with chipmaker Intel, is one of the few semiconductor companies that depend on internal capacity for manufacturing bulk of its devices. Since the company usually builds capacity well ahead of demand, it is able to make opportunistic purchases. As a result, the company is able to contain capex at up to 4% of sales, even while expanding business.
The company remains focused on increasing its free cash flow per share and strengthening competitive advantages. Overall, we remain optimistic about its compelling product line, differentiation in business and manufacturing efficiencies that include growing 300-millimeter Analog output. However, risks associated with a high debt level persist.
Let’s delve deeper into the numbers.
Revenues in Detail
Analog, Embedded Processing and Other segments generated 67%, 23% and 10% of quarterly revenues, respectively.
Analog, which includes Power, Signal Chain and High Volume products, was up 12% from the year-ago quarter to $2.7 billion. The year-over-year growth was driven by strong performance in the product lines — power and signal chain.
The Embedded Processing segment, which includes Connected Microcontrollers and Processors, was up 9% year over year to $943 million. The year-over-year growth was driven by stronger sales across both the product lines — processors and connected microcontrollers.
The Other segment, which includes DLPs, custom ASICs and calculators, was down 7% from the prior-year quarter to $384 million.
Margins
Texas Instruments’ gross margin of 65.2% was up 62 basis points (bps) sequentially and 91 bps from the year-ago quarter. The company’s gross margin has been improving consistently with more production shifts to its 300 mm line.
Operating expenses of $825 million were up 1.6% from a year ago. Operating margin was 42.6%, up 250 bps from the year-ago quarter.
Balance Sheet and Cash Flow
Cash and short-term investments balance was$5.1 billion compared with $4.1 billion in the last reported quarter.
The company generated $1.8 billion in cash from operations, spending $249 million on capex, $1.02 billion on share repurchases and $606 million on cash dividends. Free cash flow at the end of the second quarter was $5.7 billion.
At the end of the quarter, it had long-term debt of $5.1 billion.
Guidance
The company provided guidance for the third quarter.
It expects revenues between $4.11 billion and $4.45billion (up 7% sequentially at the midpoint of the guided range). The Zacks Consensus Estimate for third-quarter revenues is pegged at $4.25 billion.
Earnings for the quarter are expected in the range of $1.41-$1.63 per share. The Zacks Consensus Estimate for third-quarter earnings is pegged at $1.48. The guidance includes an estimated $10 million discrete tax benefit.
Texas Instruments Incorporated Price, Consensus and EPS Surprise
Texas Instruments Incorporated Price, Consensus and EPS Surprise | Texas Instruments Incorporated Quote
Zacks Rank &Other Stocks to Consider
Currently, Texas Instruments carries a Zacks Rank #2 (Buy). Other top-ranked stocks in the same industry include Groupon (GRPN - Free Report) , IAC/InterActiveCorp (IAC - Free Report) and Facebook . While Groupon and IAC/InterActiveCorp sport a Zacks Rank #1 (Strong Buy), Facebook holds a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth for Groupon, IAC/InterActiveCorp and Facebook is currently projected to be 3%, 7.5% and 24.4%, respectively.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>