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Bull of the Day: Texas Instruments (TXN)

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Headquartered in Dallas, Texas, Texas Instruments (TXN - Free Report) is a global semiconductor company and an original equipment manufacturer of analog, mixed signal and digital signal processing (DSP) integrated circuits.

Their chips are used in everything from mobile phones to industrial equipment and many smart products.

The company has about 30,000 employees in more than 30 countries and 15 manufacturing sites in 9 countries. More than 85% of their revenue comes from Analog and Embedded Processing segments.

Solid Quarterly Results

The company reported excellent results for the second quarter, exceeding Zacks Consensus Estimates for both earnings and revenues. Net earnings of $1.03 per share exceeded our estimate by eight cents. Revenues of $3.7 billion beat the consensus by $139 million.

Strong results were driven by growth in auto, industrial, communications and personal electronics markets. The company also upgraded its guidance for the third quarter.

"Revenue increased 13% from the same quarter a year ago. Demand for our products continued to be strong in the automotive market and continued to strengthen in the industrial market. In our core businesses, Analog revenue grew 18% and Embedded Processing revenue grew 15% from the same quarter a year ago. Operating margin increased in both businesses,” said the CEO.

Rising Estimates

Analysts have been raising their estimates for the company after stronger than expected results and updated guidance. Zacks Consensus Estimates for the current and next year are now $4.13 per share and $4.30 per share, up from $4.08 and $4.26 respectively, before the results.

Returning Capital to Shareholders

The company remained committed to return its free cash flow to shareholders through dividends and share repurchases. They have been consistently growing their dividend—from $0.089 per share in 2004 to $2.00 per share currently. Their current dividend yield is 2.41%. During this period, they have reduced their shares outstanding by 42%.

The Bottom Line

In addition to a top Zacks Stock Rank, the stock has Zacks Style Scores of “A” for Momentum while the Semiconductor--General Industry is currently ranked 3 out of 265 Zacks Industries (top 1%). Rising demand for its chips from some high growth areas of the market will continue to support the stock going forward.


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