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Can Product Strength Aid Texas Instruments (TXN) Q2 Earnings?

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Texas Instruments (TXN - Free Report) or TI is scheduled to report second-quarter 2019 results on Jul 23, after market close.

The company surpassed the Zacks Consensus Estimate in three of the trailing four quarters, with average positive surprise of 3.41%.

We do not expect Texas Instruments (TXN - Free Report) to perform well in the to-be-reported quarter due to weakness in overall demand, uncertain macro environment, and increased competition in the auto and industrial space. However, strength in several higher-margin and high-growth market areas may aid its results.

It is gradually expanding exposure in industrial and automotive markets, which might also benefit the upcoming results.

Texas Instruments Incorporated Price and EPS Surprise

 

Expectations From Analog

TI’s compelling product line and manufacturing efficiencies, which include growing 300-millimeter Analog output, have been helping this segment to achieve growth. This trend is likely to continue in the quarter to be reported as well. However, weak performance of high-volume and power product lines could impact its upcoming results. Also, reduced factory loading could affect the segment’s performance.

The Zacks Consensus Estimate for Analog segment revenues is currently pegged at $2.49 billion.

Expectations from Embedded Processing

Weak performance of processors and connected microcontrollers, along with reduced factory loadings may impact results in the to-be-reported quarter.

The Zacks Consensus Estimate for Embedded Processing revenues is currently pegged at $787 million.

Overall Picture

TI has always been a well-executed company. Management remains focused on increasing its free cash flow per share and strengthening competitive advantages. However, increasing competition in the auto and industrial space, along with unfavorable currency impact may hurt the company’s results in the upcoming quarterly release.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.

Currently, Texas Instruments has a Zacks Rank #4 (Sell) and an Earnings ESP of -4.28%, making surprise prediction difficult. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to Consider

Here are a couple of stocks that you may want to consider, as our model shows that these have the right combination of elements to post a positive earnings surprise in the quarter to be reported.

Amazon.com, Inc. (AMZN - Free Report) has an Earnings ESP of +15.56% and carries a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Facebook, Inc. has an Earnings ESP of +0.61% and a Zacks Rank #2.

Thermo Fisher Scientific Inc. (TMO - Free Report) has an Earnings ESP of +0.54% and holds a Zacks Rank #2.

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