Texas Instruments Revises Guidance

Recently, Texas Instruments ( TXN - Analyst Report ) , or "TI," narrowed its revenue and earnings expectations for the third quarter of 2012.

The chipmaker now expects sales of $3.27–$3.41 billion versus its previous guidance of $3.21–$3.47 billion. The earnings outlook range has also been raised to 38–42 cents per share from the previous guidance of 34–42 cents.

Management stated that insurance receipts of $60 million related to the 2011 earthquake in Japan and various restructuring activities will likely help earnings in the upcoming quarter. The company also said that the wireless segment is doing better than initially expected owing to new tablet launches that use the company’s ARM-based OMAP processors. However, TI expects the demand for the chips to be at the low end of its expectations due to weak markets in Europe.

Recently, chip maker Intel Corp. ( INTC - Analyst Report ) slashed its sales forecast for the third quarter on account of lower-than-expected demand for the chips and a challenging global economy. Intel shares fell 3.61% to $24.19 following the guidance revision.

Hence, most of the investors expected TI to lower its guidance due to soft market conditions. But fortunately, the company has not reduced the midpoint of the guidance, allaying investor concerns.

TI’s compelling product line-up, the increased differentiation in its business, restructuring activities and lower-cost 300mm capacity should drive earnings in the longer term. In the second quarter, TI posted decent numbers, with both revenue and earnings surpassing our expectations.

Increasing competition from Maxim Integrated Products ( MXIM - Analyst Report ) , Analog Devices ( ADI - Analyst Report ) , Broadcom (BRCM), and Intel ( INTC - Analyst Report ) are concerns.

Currently, Texas Instruments has a Zacks #3 Rank, which translates into a short-term Hold rating.