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Texas Instruments (TXN) Beats on Q3 Earnings, Lags Revenues
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Texas Instruments (TXN - Free Report) delivered third-quarter 2018 earnings of $1.58 per share, beating the Zacks Consensus Estimate of $1.53. The figure increased 25.4% year over year and 15.3% sequentially. Further, it came within management’s guided range of $1.41-$1.63.
The company reported revenues of $4.26 billion, up 4% from the year-ago quarter and 5.9% sequentially. The figure also came within the guided range of $4.11-$4.45 billion.
Strong performance of analog segment across all the end-markets, especially in the communication equipment market, drove top-line growth.
However, the revenues figure missed the Zacks Consensus Estimate of $4.3 billion in the reported quarter.
The top-line was affected by the decline in the demand for the company’s products throughout the reported quarter. Moreover, weak performance of embedded processing segment also impacted the results in the third quarter.
Notably, shares of the company have plunged 5.93% in the after-hours trading. This can primarily be attributed to weaker outlook for revenues as well as earnings compared with the figures in the reported quarter.
Coming to the price performance, the stock has declined 8.3% on a year-to-date basis against the industry’s decline of 0.1%.
Quarter in Detail
The company continues to increase R&D investments which remain a key catalyst for the expansion of its product portfolio.
Texas Instruments’ growing investments in the automotive and industrial markets remained positive throughout the quarter. The company witnessed double-digit growth in the automotive market during the reported quarter.
Further, it witnessed low-single digit growth in the communication equipment market. However, the company did not perform well in the personal electronics market and consequently declined by mid-single digit in the third quarter.
Segments in Detail
Analog: The company generated $2.91 billion from this segment (68.2% of total revenues), which increased 8% from the year-ago quarter. The segment witnessed strong performance of power and signal chain product lines. Moreover, with the emergence of 5G technology, analog products gained traction in the communication equipment market during the third quarter. However, the segment was affected by weak performance of high-volume products.
Embedded Processing: This segment generated $894 million revenues (21% of total revenues), declining 4% year over year. This was primarily owing to weak performance of processors during the reported quarter. Further, sluggishness in the communications equipment market remained negative throughout the reported quarter without which the revenues within this segment would have reflected growth.
Other: Revenues in this segment were $460 million (10.8% of total revenues). The figure fell 5.5% from the year-ago quarter due to weak performing custom products.
Texas Instruments Incorporated Price, Consensus and EPS Surprise
Texas Instruments’ gross margin of 65.8% was up 60 basis points (bps) sequentially and 130 bps from the year-ago quarter.
Operating expenses of $786 million were down 0.1% from a year ago and 4.7% sequentially.
Operating margin was 45.5%, up 210 bps from the year-ago quarter and 290 bps from the previous quarter.
Balance Sheet and Cash Flow
As of Sep 30, 2018, cash and short-term investments balance came in $5.1 billion which is in line with the figure as of Jun 30, 2018.
The company generated $2.12 billion of cash from operations, which increased from $1.82 billion in the previous quarter.
Capex was $370 million in the third quarter. Free cash flow at the end of the third quarter was $1.74 billion, which was up from $1.58 billion in the previous quarter.
At the end of the third quarter, it had long-term debt of $4.3 billion, down from $5.1 billion in the second quarter.
Guidance
For fourth-quarter 2018, the company expects revenues between $3.6 billion and $3.9 billion. The Zacks Consensus Estimate for revenues is pegged at $4 billion.
Earnings are expected in the range of $1.14-$1.34 per share. The Zacks Consensus Estimate for earnings is pegged at $1.38.
Zacks Rank & Other Stocks to Consider
Currently, Texas Instruments carries a Zacks Rank #4 (Sell).
Long-term earnings growth rate for Upland Software, Vishay Intertechnology and Twilio is currently pegged at 20%, 9.16% and 9%, respectively.
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Texas Instruments (TXN) Beats on Q3 Earnings, Lags Revenues
Texas Instruments (TXN - Free Report) delivered third-quarter 2018 earnings of $1.58 per share, beating the Zacks Consensus Estimate of $1.53. The figure increased 25.4% year over year and 15.3% sequentially. Further, it came within management’s guided range of $1.41-$1.63.
The company reported revenues of $4.26 billion, up 4% from the year-ago quarter and 5.9% sequentially. The figure also came within the guided range of $4.11-$4.45 billion.
Strong performance of analog segment across all the end-markets, especially in the communication equipment market, drove top-line growth.
However, the revenues figure missed the Zacks Consensus Estimate of $4.3 billion in the reported quarter.
The top-line was affected by the decline in the demand for the company’s products throughout the reported quarter. Moreover, weak performance of embedded processing segment also impacted the results in the third quarter.
Notably, shares of the company have plunged 5.93% in the after-hours trading. This can primarily be attributed to weaker outlook for revenues as well as earnings compared with the figures in the reported quarter.
Coming to the price performance, the stock has declined 8.3% on a year-to-date basis against the industry’s decline of 0.1%.
Quarter in Detail
The company continues to increase R&D investments which remain a key catalyst for the expansion of its product portfolio.
Texas Instruments’ growing investments in the automotive and industrial markets remained positive throughout the quarter. The company witnessed double-digit growth in the automotive market during the reported quarter.
Further, it witnessed low-single digit growth in the communication equipment market. However, the company did not perform well in the personal electronics market and consequently declined by mid-single digit in the third quarter.
Segments in Detail
Analog: The company generated $2.91 billion from this segment (68.2% of total revenues), which increased 8% from the year-ago quarter. The segment witnessed strong performance of power and signal chain product lines. Moreover, with the emergence of 5G technology, analog products gained traction in the communication equipment market during the third quarter. However, the segment was affected by weak performance of high-volume products.
Embedded Processing: This segment generated $894 million revenues (21% of total revenues), declining 4% year over year. This was primarily owing to weak performance of processors during the reported quarter. Further, sluggishness in the communications equipment market remained negative throughout the reported quarter without which the revenues within this segment would have reflected growth.
Other: Revenues in this segment were $460 million (10.8% of total revenues). The figure fell 5.5% from the year-ago quarter due to weak performing custom products.
Texas Instruments Incorporated Price, Consensus and EPS Surprise
Texas Instruments Incorporated Price, Consensus and EPS Surprise | Texas Instruments Incorporated Quote
Margins
Texas Instruments’ gross margin of 65.8% was up 60 basis points (bps) sequentially and 130 bps from the year-ago quarter.
Operating expenses of $786 million were down 0.1% from a year ago and 4.7% sequentially.
Operating margin was 45.5%, up 210 bps from the year-ago quarter and 290 bps from the previous quarter.
Balance Sheet and Cash Flow
As of Sep 30, 2018, cash and short-term investments balance came in $5.1 billion which is in line with the figure as of Jun 30, 2018.
The company generated $2.12 billion of cash from operations, which increased from $1.82 billion in the previous quarter.
Capex was $370 million in the third quarter. Free cash flow at the end of the third quarter was $1.74 billion, which was up from $1.58 billion in the previous quarter.
At the end of the third quarter, it had long-term debt of $4.3 billion, down from $5.1 billion in the second quarter.
Guidance
For fourth-quarter 2018, the company expects revenues between $3.6 billion and $3.9 billion. The Zacks Consensus Estimate for revenues is pegged at $4 billion.
Earnings are expected in the range of $1.14-$1.34 per share. The Zacks Consensus Estimate for earnings is pegged at $1.38.
Zacks Rank & Other Stocks to Consider
Currently, Texas Instruments carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the broader technology sector are Upland Software (UPLD - Free Report) , Vishay Intertechnology (VSH - Free Report) and Twilio (TWLO - Free Report) , each flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth rate for Upland Software, Vishay Intertechnology and Twilio is currently pegged at 20%, 9.16% and 9%, respectively.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
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