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Texas Instruments (TXN) Q2 Earnings & Revenues Beat, Rise Y/Y

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Texas Instruments (TXN - Free Report) reported second-quarter 2021 earnings of $2.05 per share, which surpassed the Zacks Consensus Estimate by 12.6%. The bottom line also surpassed management’s guidance of $1.68-$1.92 per share.

The figure increased 39% year over year and 9.6% sequentially.

The company reported revenues of $4.6 billion, which beat the Zacks Consensus Estimate of $4.3 billion. The top line also comfortably surpassed the management’s guidance of $4.13-$4.47 billion.

The top-line figure improved 41% from the year-ago quarter and 6.8% from the prior quarter.

Top-line growth was driven by strong performance delivered by the Analog and Embedded Processing segments. Growing momentum across personal electronics, automotive and industrial end-markets, owing to solid demand environment, contributed well.

However, softness in the communication equipment market was an overhang in the reported quarter.

Coming to the price performance, Texas Instruments has returned 12.3% on a year-to-date basisagainst the industry’s decline of 20.6%.

Nevertheless, the company’s efficient manufacturing strategies and continuous returns to shareholders remain tailwinds. Its strong investments in growth avenues and competitive advantages are the positives.

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.

 

Zacks Investment Research
Image Source: Zacks Investment Research

 

End-Market in Detail

Revenues in the industrial market grew 40% from the year-ago quarter, owing to solid momentum across most sectors.

Strong traction of the company across the major sectors led to year-over-year growth of 25% in revenues from the personal electronics market in the reported quarter.

The company’s revenue growth in the automotive market more than doubled from the year-ago quarter. Continuous recovery in the automotive space remained a tailwind.

Meanwhile, revenues in the communications equipment market declined year over year in the upper teens. Enterprise systems’ revenues were flat on a year-over-year basis.

Segments in Detail

Analog: The company generated $3.5 billion from the segment (75.6% of total revenues), which increased 42% from the year-ago quarter.

Embedded Processing: The segment generated $780 million in revenues (17% of total revenues), up 43% year over year.

Other: Revenues in the segment were $336 million (7.4% of total revenues). The figure was up 30% from the prior-year quarter.

Texas Instruments Incorporated Price, Consensus and EPS Surprise

 

Texas Instruments Incorporated Price, Consensus and EPS Surprise

Texas Instruments Incorporated price-consensus-eps-surprise-chart | Texas Instruments Incorporated Quote

Operating Details

Texas Instruments’ gross margin of 67.2% expanded 290 basis points (bps) from the year-ago quarter.

As a percentage of revenues, selling, general and administrative expenses contracted 310 bps year over year to $425 million in the reported quarter.

Research and development expenses of $391 million contracted 320 bps from the year-ago quarter as a percentage of revenues.

Operating margin was 48.3%, which expanded significantly from 37.9% in the prior-year quarter.

Balance Sheet & Cash Flow

As of Jun 30, 2021, the cash and short-term investment balance was $7.4 billion, which increased from $6.7 billion as of Mar 31, 2021.

At the end of the reported quarter, the company had long-term debt of $5.7 billion, up from $6.2 billion in the prior quarter.

Current debt was $499 million in the second quarter, which was nil in the previous quarter.

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

Capex was $386 million in the reported quarter. Further, free cash flow stood at $1.7 billion.

Texas Instruments paid out dividends worth $942 million in the reported quarter. The company repurchased shares worth $146 million.

Guidance

For third-quarter 2021, Texas Instruments expects revenues between $4.40 billion and $4.76 billion. The Zacks Consensus Estimate for revenues is pegged at $4.60 billion.

Earnings are expected to be $1.87-$2.13 per share. The Zacks Consensus Estimate for earnings is pegged at $1.96 per share.

Zacks Rank & Stocks to Consider

Currently, Texas Instruments carries a Zacks Rank #3 (Hold).

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

Long-term earnings growth rates of KLA, AMETEK and Garmin are pegged at 14.03%, 10.18% and 6.8%, respectively.

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