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Texas Instruments (TXN - Free Report) , a Zacks Rank #1 (Strong Buy) designs and manufactures semiconductor solutions for analog and digital embedded and application processing. It has two major segments: Analog & Embedded Processing. The Analog segment semiconductors change real-world signals such as sound, temperature, pressure or images, by conditioning them, amplifying them and often converting them to a stream of digital data that can be processed by other semiconductors, such as embedded processors. Embedded processing segment designed to handle specific tasks and can be optimized for various combinations of performance, power and cost, depending on the application.
Earnings Results
The company recently reported Q1 18 earnings results where they beat the Zacks consensus earnings and revenue estimates. This was the ninth consecutive quarter where they either met or beat on both ends. Overall, the results were quite impressive. On a year over year basis, revenues rose by +11%, and EPS increased by +39%. Further, the company posted a +19% improvement in cash flow from operations while free cash flows grew by +17%. On a segment basis, Analog revenues increased by +14% while Embedded Processing revenues rose by +15%.
Management cited high demand for its products in both the Industrial and Automotive markets, and broad-based order strength as the big drivers behind the impressive quarterly results.
Most importantly for the long term outlook of the company, the Q1 results eased fears that semiconductor demand was decelerating. In the previous quarter there had been some concern that the semiconductor demand was hitting its peak cycle, but Q1’s performance, and strong Q2 guidance has eased those fears.
Looking Ahead
Going forward, management’s Q2 EPS and revenue guidance was just above the midpoints of the consensus estimates; EPS now between $1.19-1.39, and revenues ranging from $3.78-4.1 billion. Further, management commented that its operating tax rates would be lower for both 2019 and 2020 than previously expected; 16% for 2019 down from 18%, and 20% in 2018 down from 23%.
Price and Earnings Consensus Chart
As you can see in the chart below, TXN has been on a steady uptrend since the beginning of 2016, and fiscal earnings estimates have moved up year after year.
Texas Instruments Incorporated Price and Consensus
Over the past 30 days, earnings estimates have been positively revised for Q2 18, Q3 18, FY 18 and FY 19. Q2 18 improved from $1.23 to $1.30, Q3 18 rose from $1.40 to $1.48, FY 18 jumped up from $4.97 to $5.43, and FY 19 was lifted from $5.67 to $6.01.
Lastly, TXN has returned $5.1 billion to its shareholders over the past 12 months in the form of dividends, and share repurchases. Moreover, the dividend payments represented 45% of free cash flows. These payments to holders are expected to continue through 2018 as the company has several billion remaining in its repurchase program. Currently, TXN has an annual dividend yield of 2.24%
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Bull of the Day: Texas Instruments (TXN)
Texas Instruments (TXN - Free Report) , a Zacks Rank #1 (Strong Buy) designs and manufactures semiconductor solutions for analog and digital embedded and application processing. It has two major segments: Analog & Embedded Processing. The Analog segment semiconductors change real-world signals such as sound, temperature, pressure or images, by conditioning them, amplifying them and often converting them to a stream of digital data that can be processed by other semiconductors, such as embedded processors. Embedded processing segment designed to handle specific tasks and can be optimized for various combinations of performance, power and cost, depending on the application.
Earnings Results
The company recently reported Q1 18 earnings results where they beat the Zacks consensus earnings and revenue estimates. This was the ninth consecutive quarter where they either met or beat on both ends. Overall, the results were quite impressive. On a year over year basis, revenues rose by +11%, and EPS increased by +39%. Further, the company posted a +19% improvement in cash flow from operations while free cash flows grew by +17%. On a segment basis, Analog revenues increased by +14% while Embedded Processing revenues rose by +15%.
Management cited high demand for its products in both the Industrial and Automotive markets, and broad-based order strength as the big drivers behind the impressive quarterly results.
Most importantly for the long term outlook of the company, the Q1 results eased fears that semiconductor demand was decelerating. In the previous quarter there had been some concern that the semiconductor demand was hitting its peak cycle, but Q1’s performance, and strong Q2 guidance has eased those fears.
Looking Ahead
Going forward, management’s Q2 EPS and revenue guidance was just above the midpoints of the consensus estimates; EPS now between $1.19-1.39, and revenues ranging from $3.78-4.1 billion. Further, management commented that its operating tax rates would be lower for both 2019 and 2020 than previously expected; 16% for 2019 down from 18%, and 20% in 2018 down from 23%.
Price and Earnings Consensus Chart
As you can see in the chart below, TXN has been on a steady uptrend since the beginning of 2016, and fiscal earnings estimates have moved up year after year.
Texas Instruments Incorporated Price and Consensus
Texas Instruments Incorporated Price and Consensus | Texas Instruments Incorporated Quote
Increasing Earnings Estimates
Over the past 30 days, earnings estimates have been positively revised for Q2 18, Q3 18, FY 18 and FY 19. Q2 18 improved from $1.23 to $1.30, Q3 18 rose from $1.40 to $1.48, FY 18 jumped up from $4.97 to $5.43, and FY 19 was lifted from $5.67 to $6.01.
Lastly, TXN has returned $5.1 billion to its shareholders over the past 12 months in the form of dividends, and share repurchases. Moreover, the dividend payments represented 45% of free cash flows. These payments to holders are expected to continue through 2018 as the company has several billion remaining in its repurchase program. Currently, TXN has an annual dividend yield of 2.24%
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>