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Texas Instruments (TXN - Free Report) reported second-quarter 2022 earnings of $2.45 per share, which surpassed the Zacks Consensus Estimate by 18.4%. The bottom line beat management’s guidance of $1.84-$2.26 per share. Further, the figure rose 20% year over year and 4.3% sequentially.
The company reported revenues of $5.2 billion, which improved 14% from the year-ago quarter and 6.3% from the prior quarter. The top line surpassed management’s guidance of $4.2-$4.8 billion. Also, revenues beat the Zacks Consensus Estimate of $4.5 billion.
Top-line growth was driven by well-performing Analog, Embedded Processing and Other segments. A strong momentum across automotive and industrial end markets contributed well. Robust growth in the communication equipment and enterprise systems markets drove the results.
However, softness in the personal electronics market was concerning. The company continues to see the same trend in the current quarter.
Coming to the price performance, Texas Instruments has lost 13.4% on a year-to-date basis against the industry’s decline of 34.1%.
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.
Notably, shares of the company gained 2.7% in the after-hours trading, which can be primarily attributed to a strong outlook for third-quarter revenues and earnings.
Texas Instruments Incorporated Price, Consensus and EPS Surprise
Revenues in the industrial market grew in high-single digits from the year-ago quarter.
The company’s revenues generated from the automotive market were above 20% reported in the year-ago quarter.
Revenues in the communications equipment market increased 25% year over year.
Enterprise systems’ revenues were up in the mid-teens on a year-over-year basis, owing to the strength in data center and enterprise computing.
However, the company continued to witness sluggishness in the personal electronics market in which revenues were up in low-single digits from the prior-year quarter.
Segments in Detail
Analog: The company generated $3.9 billion from the segment (76.6% of total revenues), which increased 15% from the year-ago quarter.
Embedded Processing: The segment generated $821 million in revenues (15.7% of total revenues), up 5% year over year.
Other: Revenues in the segment were $399 million (7.7% of total revenues). The figure was up 19% from the prior-year quarter.
Operating Details
Texas Instruments’ gross margin of 70% expanded 300 basis points (bps) from the year-ago quarter.
As a percentage of revenues, selling, general and administrative expenses contracted 120 bps year over year to $422 million in the reported quarter.
Research and development expenses of $414 million contracted 60 bps from the year-ago quarter as a percentage of revenues.
The operating margin was 52.2%, which expanded 390 bps from the prior-year quarter.
Balance Sheet & Cash Flow
As of Jun 30, 2022, the cash and short-term investment balance was $8.4 billion compared with $9.8 billion as of Mar 31, 2022.
At the end of the reported quarter, the company had long-term debt of $6.7 billion compared with $7.2 billion in the prior quarter.
Current debt was $499 million in second-quarter 2022 compared with $500 million in first-quarter 2022.
The company generated $1.8 billion of cash from operations, down from $2.1 billion in the previous quarter.
Capex was $597 million in the reported quarter. Further, free cash flow stood at $1.2 billion.
Texas Instruments paid out dividends worth $1.06 billion in the reported quarter. The company repurchased shares worth $1.2 billion.
Guidance
For third-quarter 2022, Texas Instruments expects revenues between $4.9 billion and $5.3 billion. The Zacks Consensus Estimate for revenues is pegged at $4.84 billion.
The company expects earnings of $2.23-$2.51 per share. The Zacks Consensus Estimate for the same is pegged at $2.19 per share.
Zacks Rank and Stocks to Consider
Currently, Texas Instruments carries a Zacks Rank #3 (Hold).
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Texas Instruments (TXN) Q2 Earnings Beat, Revenues Rise Y/Y
Texas Instruments (TXN - Free Report) reported second-quarter 2022 earnings of $2.45 per share, which surpassed the Zacks Consensus Estimate by 18.4%. The bottom line beat management’s guidance of $1.84-$2.26 per share. Further, the figure rose 20% year over year and 4.3% sequentially.
The company reported revenues of $5.2 billion, which improved 14% from the year-ago quarter and 6.3% from the prior quarter. The top line surpassed management’s guidance of $4.2-$4.8 billion. Also, revenues beat the Zacks Consensus Estimate of $4.5 billion.
Top-line growth was driven by well-performing Analog, Embedded Processing and Other segments. A strong momentum across automotive and industrial end markets contributed well. Robust growth in the communication equipment and enterprise systems markets drove the results.
However, softness in the personal electronics market was concerning. The company continues to see the same trend in the current quarter.
Coming to the price performance, Texas Instruments has lost 13.4% on a year-to-date basis against the industry’s decline of 34.1%.
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.
Notably, shares of the company gained 2.7% in the after-hours trading, which can be primarily attributed to a strong outlook for third-quarter revenues and earnings.
Texas Instruments Incorporated Price, Consensus and EPS Surprise
Texas Instruments Incorporated price-consensus-eps-surprise-chart | Texas Instruments Incorporated Quote
End-Market Details
Revenues in the industrial market grew in high-single digits from the year-ago quarter.
The company’s revenues generated from the automotive market were above 20% reported in the year-ago quarter.
Revenues in the communications equipment market increased 25% year over year.
Enterprise systems’ revenues were up in the mid-teens on a year-over-year basis, owing to the strength in data center and enterprise computing.
However, the company continued to witness sluggishness in the personal electronics market in which revenues were up in low-single digits from the prior-year quarter.
Segments in Detail
Analog: The company generated $3.9 billion from the segment (76.6% of total revenues), which increased 15% from the year-ago quarter.
Embedded Processing: The segment generated $821 million in revenues (15.7% of total revenues), up 5% year over year.
Other: Revenues in the segment were $399 million (7.7% of total revenues). The figure was up 19% from the prior-year quarter.
Operating Details
Texas Instruments’ gross margin of 70% expanded 300 basis points (bps) from the year-ago quarter.
As a percentage of revenues, selling, general and administrative expenses contracted 120 bps year over year to $422 million in the reported quarter.
Research and development expenses of $414 million contracted 60 bps from the year-ago quarter as a percentage of revenues.
The operating margin was 52.2%, which expanded 390 bps from the prior-year quarter.
Balance Sheet & Cash Flow
As of Jun 30, 2022, the cash and short-term investment balance was $8.4 billion compared with $9.8 billion as of Mar 31, 2022.
At the end of the reported quarter, the company had long-term debt of $6.7 billion compared with $7.2 billion in the prior quarter.
Current debt was $499 million in second-quarter 2022 compared with $500 million in first-quarter 2022.
The company generated $1.8 billion of cash from operations, down from $2.1 billion in the previous quarter.
Capex was $597 million in the reported quarter. Further, free cash flow stood at $1.2 billion.
Texas Instruments paid out dividends worth $1.06 billion in the reported quarter. The company repurchased shares worth $1.2 billion.
Guidance
For third-quarter 2022, Texas Instruments expects revenues between $4.9 billion and $5.3 billion. The Zacks Consensus Estimate for revenues is pegged at $4.84 billion.
The company expects earnings of $2.23-$2.51 per share. The Zacks Consensus Estimate for the same is pegged at $2.19 per share.
Zacks Rank and Stocks to Consider
Currently, Texas Instruments carries a Zacks Rank #3 (Hold).
Investors interested in the broader Zacks Computer & Technology sector can consider some better-ranked stocks like Aspen Technology (AZPN - Free Report) , Keysight Technologies (KEYS - Free Report) and Asure Software (ASUR - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Aspen technology has returned 18.7% in the year-to-date period. The long-term earnings growth rate for AZPN is currently projected at 16.3%.
Keysight Technologies has lost 26.8% in the year-to-date period. The long-term earnings growth rate for KEYS is currently projected at 9.1%.
Asure Software has lost 26.8% in the year-to-date period. The long-term earnings growth rate for ASUR is currently projected at 14%.