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Texas Instruments’ (TXN - Free Report) first-quarter 2018 earnings of $1.11 per share exceeded the Zacks Consensus Estimate of $1.21. Earnings increased 36% year over year and 11% sequentially.
Revenues of $3.79 billion beat the Zacks Consensus Estimate of $3.65 billion,up 11.4% on a year-over-year basis and 1% sequentially. Also, it came at the higher end of the guided range of $3.49-$3.79 billion, driven by strong demand for Analog and Embedded Processing products in the auto and industrial markets.
Following first-quarter results, shares rose 5.62% in after-hours trading, driven by strong demand in the auto and industrial markets. Also, strong top-line outlook could be one of the reasons for surge in the share price.
Also, Texas Instruments’ shares have rallied 25.1% in the past 12-month period, underperforming its industry’s growth of 49.7%.
Segment wise, growth of analog and embedded processing applications business was strong. These typically yield a more stable business as well as strong margins. The Other segment declined year over year.
Texas Instruments continues to prudently invest its R&D dollars into several high-margin, high-growth areas of the analog and embedded processing markets. This is gradually expanding its exposure to industrial and automotive markets, while reducing the same in volatile consumer/computing markets, and increasing dollar content at customers..
Internally, the company has always executed rather well. It, along with chipmaker Intel , is one of the few semiconductor companies that depend on internal capacity for manufacturing the bulk of its devices. Since the company usually builds out capacity well ahead of demand, it is able to make opportunistic purchases. As a result, it is able to contain capex at up to 4% of sales, even while expanding its business.
The company remains focused on increasing free cash flow per share and strengthening competitive advantages. Overall, we remain optimistic about its compelling product line, differentiation in business and manufacturing efficiencies that include growing 300-millimeter Analog output. However, risks associated with a high debt level persist.
Let’s see what the numbers say.
Revenues in Detail
Analog, Embedded Processing and Other segments generated 68%, 25% and 7% of quarterly revenues, respectively.
Analog, which includes Power, Signal Chain and High Volume products, was up 14% from the year-ago quarter to $2.6 billion. The year-over-year growth was driven by strong performance in the product lines — power and signal chain.
The Embedded Processing segment, which includes Connected Microcontrollers and Processors, was up 15% year over year to $926 million. The year-over-year growth was driven by stronger sales across both the product lines — processors and connected microcontrollers.
The Other segment, which includes DLPs, custom ASICs and calculators, was down 13% from the prior-year quarter to $297 million.
Margins
Texas Instruments’ gross margin of 64.6% was down 48 basis points (bps) sequentially but up 156 bps from the year-ago quarter. The company’s gross margin has been improving consistently with more production shifts to its 300 mm line.
Operating expenses of $899 million were up 2.5% sequentially and 0.8% from the last year. Operating margin was 40.9%, down 82 bps sequentially but up 405 bps from the year-ago quarter.
Balance Sheet and Cash Flow
Cash and short-term investments balance was $4.1 billion compared with $4.5 billion in the prior quarter.
The company generated $1.1 billion in cash from operations, spending $189 million on capex, $873 million on share repurchases and $611 million on cash dividends. Free cash flow at the end of the first quarter was $923 million.
At quarter end, it had $3.6 billion in long-term debt and $500 million in short-term debt.
Guidance
The company provided guidance for the second quarter.
It expects revenues between $3.78 billion and $4.10 billion (up 4% sequentially at the midpoint). The Zacks Consensus Estimate for the upcoming quarter’s revenues is pegged at $3.88 billion.
Earnings for the quarter are expected to be in the range of $1.19-$1.39 per share. The Zacks Consensus Estimate for earnings for the to-be-reported quarter is pegged at $1.23. The guidance includes an estimated $10 million discrete tax benefit.
Texas Instruments Incorporated Price, Consensus and EPS Surprise
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Texas Instruments (TXN) Q1 Earnings & Revenues Beat Estimates
Texas Instruments’ (TXN - Free Report) first-quarter 2018 earnings of $1.11 per share exceeded the Zacks Consensus Estimate of $1.21. Earnings increased 36% year over year and 11% sequentially.
Revenues of $3.79 billion beat the Zacks Consensus Estimate of $3.65 billion,up 11.4% on a year-over-year basis and 1% sequentially. Also, it came at the higher end of the guided range of $3.49-$3.79 billion, driven by strong demand for Analog and Embedded Processing products in the auto and industrial markets.
Following first-quarter results, shares rose 5.62% in after-hours trading, driven by strong demand in the auto and industrial markets. Also, strong top-line outlook could be one of the reasons for surge in the share price.
Also, Texas Instruments’ shares have rallied 25.1% in the past 12-month period, underperforming its industry’s growth of 49.7%.
Segment wise, growth of analog and embedded processing applications business was strong. These typically yield a more stable business as well as strong margins. The Other segment declined year over year.
Texas Instruments continues to prudently invest its R&D dollars into several high-margin, high-growth areas of the analog and embedded processing markets. This is gradually expanding its exposure to industrial and automotive markets, while reducing the same in volatile consumer/computing markets, and increasing dollar content at customers..
Internally, the company has always executed rather well. It, along with chipmaker Intel , is one of the few semiconductor companies that depend on internal capacity for manufacturing the bulk of its devices. Since the company usually builds out capacity well ahead of demand, it is able to make opportunistic purchases. As a result, it is able to contain capex at up to 4% of sales, even while expanding its business.
The company remains focused on increasing free cash flow per share and strengthening competitive advantages. Overall, we remain optimistic about its compelling product line, differentiation in business and manufacturing efficiencies that include growing 300-millimeter Analog output. However, risks associated with a high debt level persist.
Let’s see what the numbers say.
Revenues in Detail
Analog, Embedded Processing and Other segments generated 68%, 25% and 7% of quarterly revenues, respectively.
Analog, which includes Power, Signal Chain and High Volume products, was up 14% from the year-ago quarter to $2.6 billion. The year-over-year growth was driven by strong performance in the product lines — power and signal chain.
The Embedded Processing segment, which includes Connected Microcontrollers and Processors, was up 15% year over year to $926 million. The year-over-year growth was driven by stronger sales across both the product lines — processors and connected microcontrollers.
The Other segment, which includes DLPs, custom ASICs and calculators, was down 13% from the prior-year quarter to $297 million.
Margins
Texas Instruments’ gross margin of 64.6% was down 48 basis points (bps) sequentially but up 156 bps from the year-ago quarter. The company’s gross margin has been improving consistently with more production shifts to its 300 mm line.
Operating expenses of $899 million were up 2.5% sequentially and 0.8% from the last year. Operating margin was 40.9%, down 82 bps sequentially but up 405 bps from the year-ago quarter.
Balance Sheet and Cash Flow
Cash and short-term investments balance was $4.1 billion compared with $4.5 billion in the prior quarter.
The company generated $1.1 billion in cash from operations, spending $189 million on capex, $873 million on share repurchases and $611 million on cash dividends. Free cash flow at the end of the first quarter was $923 million.
At quarter end, it had $3.6 billion in long-term debt and $500 million in short-term debt.
Guidance
The company provided guidance for the second quarter.
It expects revenues between $3.78 billion and $4.10 billion (up 4% sequentially at the midpoint). The Zacks Consensus Estimate for the upcoming quarter’s revenues is pegged at $3.88 billion.
Earnings for the quarter are expected to be in the range of $1.19-$1.39 per share. The Zacks Consensus Estimate for earnings for the to-be-reported quarter is pegged at $1.23. The guidance includes an estimated $10 million discrete tax benefit.
Texas Instruments Incorporated Price, Consensus and EPS Surprise
Texas Instruments Incorporated Price, Consensus and EPS Surprise | Texas Instruments Incorporated Quote
Zacks Rank &Other Stocks to Consider
Texas Instruments carries a ZacksRank #2 (Buy). Other top-ranked stocks in the technology sector are Internap Corporation , Etsy, Inc. (ETSY - Free Report) and HealthStream, Inc. (HSTM - Free Report) , each sporting a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank(Strong Buy)stocks here.
Long-term earnings per share growth rate for Internap, Etsy and HealthStream is projected to be 2%, 17.3% and 16%, respectively.
Investor Alert: Breakthroughs Pending
A medical advance is now at the flashpoint between theory and realization. Billions of dollars in research have poured into it. Companies are already generating substantial revenue, and even more wondrous products are in the pipeline.
Cures for a variety of deadly diseases are in sight, and so are big potential profits for early investors. Zacks names 5 stocks to buy now.
Click here to see them >>