We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Why Is Texas Instruments (TXN) Down 0.91% Since Last Earnings Report?
Read MoreHide Full Article
A month has gone by since the last earnings report for Texas Instruments (TXN - Free Report) . Shares have lost about 0.91% 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 the most recent earnings report in order to get a better handle on the important catalysts.
Texas Instruments Reports In-Line Q2 Earnings, Up Y/Y
Texas Instruments’ 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 Estimate 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.
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 (INTC), 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). Earnings for the quarter are expected in the range of $1.41-$1.63 per share. The guidance includes an estimated $10 million discrete tax benefit.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
At this time, Texas Instruments has a great Growth Score of A, though it is lagging a bit on the momentum front with a B. However, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for growth investors than momentum investors.
Outlook
Estimates have been broadly 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.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Why Is Texas Instruments (TXN) Down 0.91% Since Last Earnings Report?
A month has gone by since the last earnings report for Texas Instruments (TXN - Free Report) . Shares have lost about 0.91% 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 the most recent earnings report in order to get a better handle on the important catalysts.
Texas Instruments Reports In-Line Q2 Earnings, Up Y/Y
Texas Instruments’ 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 Estimate 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.
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 (INTC), 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). Earnings for the quarter are expected in the range of $1.41-$1.63 per share. The guidance includes an estimated $10 million discrete tax benefit.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
At this time, Texas Instruments has a great Growth Score of A, though it is lagging a bit on the momentum front with a B. However, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for growth investors than momentum investors.
Outlook
Estimates have been broadly 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.