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Texas Instruments (TXN) Q1 Earnings Beat, Revenues Rise Y/Y

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Texas Instruments (TXN - Free Report) reported first-quarter 2021 earnings of $1.87 per share, which surpassed the Zacks Consensus Estimate by 19.9%. The bottom line also surpassed management’s guidance of $1.44-$1.66 per share.

Further, the figure increased 51% year over year and 3.9% sequentially.

The company reported revenues of $4.3 billion, which beat the Zacks Consensus Estimate of $3.9 billion. The top line also comfortably surpassed the management’s guidance of $3.79-$4.11 billion.

Further, the top-line figure improved 29% from the year-ago quarter and 5.2% from the prior quarter.

Top-line growth was driven by improving end-market conditions. Solid demand in the personal electronics and industrial market, and strong recovery in the automotive market remained major tailwinds. Further, the strong performance delivered by the Analog and Embedded Processing segments contributed well.

Coming to the price performance, Texas Instruments has returned 52.6% in a year compared with the industry’s growth of 46.5%.

However, softness in the enterprise systems market was an overhang in the reported quarter.

Nevertheless, the company’s efficient manufacturing strategies and continuous returns to shareholders remain tailwinds.

Further, the uptrend in personal electronics, owing to the rising demand for electronic gadgets for remote working and entertainment amid the pandemic, is likely to benefit the company in the days ahead.

Also, its strong investments in new growth avenues and competitive advantages are the positives.

 

End-Market in Detail

The continued rebound in the automotive space led to 25% growth in revenues of the company from this end-market on a year-over-year basis.

Further, revenues in the industrial market grew 30% from the year-ago quarter, owing to solid momentum across most sectors.

Additionally, strong traction of the company across major sectors led to year-over-year growth of 50% in the company’s revenues from the personal electronics market in the reported quarter.

Meanwhile, revenues in the communications equipment market remained flat year over year.

Furthermore, enterprise systems’ revenues were down 10% on a year-over-year basis.

Segments in Detail

Analog: The company generated $3.3 billion from the segment (76.5% of total revenues), which increased 33% from the year-ago quarter.

Embedded Processing: The segment generated $767 million in revenues (17.9% of total revenues), up 17% year over year.

Other: Revenues in the segment were $242 million (5.6% of total revenues). The figure was up 12% from the prior-year quarter.

 

Operating Details

Texas Instruments’ gross margin of 65.2% expanded 250 basis points (bps) from the year-ago quarter.

As a percentage of revenues, selling, general and administrative expenses contracted 260 bps year over year to $425 million in the reported quarter.

Further, research and development expenses of $386 million contracted 240 bps from the year-ago quarter as a percentage of revenues.

Operating margin was 45.2%, which expanded 780 bps from the prior-year quarter.

Balance Sheet & Cash Flow

As of Mar 31, 2021, the cash and short-term investment balance was $6.7 billion, which increased from $6.6 billion as of Dec 31, 2020.

At the end of the reported quarter, the company had long-term debt of $6.25 billion, up from $6.24 billion in the prior quarter.

Current debt was nil compared with $550 million in the previous quarter.

The company generated $1.9 billion of cash from operations, down from $2.1 billion in the previous quarter.

Capex was $308 million in the first quarter. Further, free cash flow stood at $1.5 billion.

Additionally, Texas Instruments paid out dividends worth $940 million in the reported quarter. Further, the company repurchased shares worth $100 million.

Guidance

For second-quarter 2021, Texas Instruments expects revenues between $4.13 billion and $4.47 billion. The Zacks Consensus Estimate for revenues is pegged at $4.15 billion.

Earnings are expected to be $1.68-$1.92 per share. The Zacks Consensus Estimate for earnings is pegged at $1.68 per share.

Zacks Rank & Other Stocks to Consider

Currently, Texas Instruments carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the broader technology sector are KLA Corporation (KLAC - Free Report) , AMETEK, Inc. (AME - Free Report) and Vishay Intertechnology, Inc. (VSH - Free Report) . All three companies currently carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The long-term earnings growth rates of KLA, AMETEK and Vishay are pegged at 14.03%, 8.78% and 20.26%, respectively.

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