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Texas Instruments (TXN) Q4 Earnings Beat, Revenues Rise Y/Y

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Texas Instruments (TXN - Free Report) reported fourth-quarter 2021 earnings of $2.27 per share, which surpassed the Zacks Consensus Estimate by 16.4%. The bottom line was within management’s guidance of $1.83-$2.07 per share. Further, the figure rose 26% year over year and 9.7% sequentially.

The company reported revenues of $4.83 billion, which improved 19% from the year-ago quarter and 4.1% from the prior quarter. The top line was within management’s guidance of $4.22-$4.58 billion. Also, revenues beat the Zacks Consensus Estimate of $4.44 billion.

Top-line growth was driven by a solid demand environment across automotive and industrial end markets. Also, the growing momentum across the communication equipment and enterprise systems markets contributed well. Strong performance delivered by the Analog and Embedded Processing segments drove the results.

However, softness in the personal electronics market was concerning.

Coming to the price performance, Texas Instruments has returned 6.7% over a year compared with the industry’s rally of 38.2%.

Nevertheless, the company’s efficient manufacturing strategies and continuous returns to shareholders are likely to instill investors’ optimism in the stock. Its substantial investments in growth avenues and competitive advantages are other positives.

The continuous rise in the demand for electronic components remains a major tailwind.

Notably, shares of Texas Instruments have gained 3.7% in the after-hours trading, which can be primarily attributed to the company’s better-than-expected guidance for first-quarter 2022.

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

End-Market in Detail

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

The company’s revenues generated from the automotive market grew in high-single digits from the year-ago quarter. The continuous recovery in the automotive space remained a tailwind.

Revenues in the communications equipment market increased 25% year over year.

Enterprise systems’ revenues witnessed 50% year-over-year growth, owing to the strength in data center and enterprise computing.

However, revenues from the personal electronics market were down in the upper-single digits compared to the year-ago quarter.

Segments in Detail

Analog: The company generated $3.8 billion from the segment (77.8% of total revenues), which increased 20% from the year-ago quarter.

Embedded Processing: The segment generated $764 million in revenues (15.8% of total revenues), up 6% year over year.

Other: Revenues in the segment were $310 million (6.4% of total revenues). The figure was up 35% from the prior-year quarter.

Operating Details

Texas Instruments’ gross margin of 69.3% expanded 440 basis points (bps) from the year-ago quarter.

As a percentage of revenues; selling, general and administrative expenses contracted 140 bps year over year to $404 million in the reported quarter.

Research and development expenses of $389 million contracted 140 bps from the year-ago quarter as a percentage of revenues.

The operating margin was 51.8%, which expanded 730 bps from the prior-year quarter.

Balance Sheet & Cash Flow

As of Dec 31, 2021, the cash and short-term investment balance was $9.7 billion compared with $9.8 billion as of Sep 30, 2021.

At the end of the reported quarter, the company had long-term debt of $7.24 billion compared with $7.23 billion in the prior quarter.

Current debt was $500 million in the fourth quarter, the same as that in the third quarter.

The company generated $2.36 billion of cash from operations, down from $2.42 billion in the previous quarter.

Capex was $1.3 billion in the reported quarter. Further, free cash flow stood at $1.1 billion.

Texas Instruments paid out dividends worth $1.1 billion in the reported quarter. The company repurchased shares worth $142 million.

Guidance

For first-quarter 2022, Texas Instruments expects revenues between $4.5 billion and $4.9 billion. The Zacks Consensus Estimate for revenues is pegged at $4.39 billion.

Earnings are expected to be $2.01-$2.29 per share. The Zacks Consensus Estimate for the same is pegged at $1.88 per share.

Zacks Rank and Stocks to Consider

Currently, Texas Instruments carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the broader technology sector are STMicroelectronics (STM - Free Report) , Advanced Micro Devices (AMD - Free Report) and Mimecast . While STMicroelectronics currently sports a Zacks Rank #1 (Strong Buy), Advanced Micro Devices and Mimecast carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

STMicroelectronics is scheduled to report fourth-quarter 2021 results on Jan 27. It has gained 14.6% over a year. The long-term earnings growth rate for STM is currently projected at 5%.

Advanced Micro Devices is slated to report fourth-quarter 2021 results on Feb 1. It has gained 25.1% over a year. The long-term earnings growth rate for AMD is currently projected at 46.2%.

Mimecast is slated to report third-quarter fiscal 2022 results on Feb 3. It has gained 82.3% over a year. The long-term earnings growth rate for MIME is currently projected at 35%.


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