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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 an original equipment manufacturer of analog, mixed signal and digital signal processing (DSP) integrated circuits.

It operates through the following business segments: Analog (67% of revenue in 2017), Embedded Processing (24%) and Other (9%).

Excellent Results and Rising Estimates

The company reported excellent results for the first quarter, beating on both the top and bottom lines. Both earnings and revenues posted double-digit growth.

Earnings of $1.11 per share exceeded the Zacks Consensus Estimate of $1.21. Earnings were up 36% year over year and 11% sequentially.

Revenues of $3.79 billion beat the Zacks Consensus Estimate of $3.65 billion and were up 11.4% year-over-year basis and 1% sequentially.

Growth was driven by strong demand for Analog and Embedded Processing products in the auto and industrial markets.

Analysts have been raising their estimates for the company after stronger than expected results.

Zacks Consensus Estimates for the current and next year have surged to $5.43 and $6.01 from $4.97 and $5.67 respectively, 30 days back.

The company has an excellent record at beating estimates as you can see from the following chart:

 

Returning Cash to Shareholders

The company has been returning a lot of cash to shareholders in the form of dividends and buybacks. They have increased dividends consecutively for the past 14 years and also reduced their share count by 43% since 2004. Their current dividend yield is 2.44%.

Bottom Line

Of late, there have been concerns about chipmakers as to whether their growth can continue, particularly in the face of weaker demand from the smartphone market.

But TI has a wide range of chips and their chips are used in everything from mobile phones to industrial equipment and many smart products.

The company is poised to benefit from strong growth in the Internet of Things space as it supplies building blocks required to enable the IoT. There is increasing demand for their products from the auto markets, as automakers race to advance driving technologies.

TXN is a Zacks Rank #1 (Strong Buy) stock with the industry rank in the top 19% and sector rank in the top 31%.

 

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