Texas Instruments earnings blow past estimates, but tame forecast hurts stock

Texas Instruments Inc. handed back gains in the extended session Wednesday, after Wall Street’s outlook for the chip maker’s third quarter fell in the middle of the company’s forecast range.

Texas Instruments
said it expects third-quarter earnings of $1.87 and $2.13 a share on revenue of $4.4 billion to $4.76 billion, while analysts on average had forecast earnings of $1.97 a share on revenue of $4.6 billion. That forecast would reflect decelerating growth from the second quarter, which exceeded internal and analysts’ estimates.

The company posted second-quarter net income of $1.93 billion, or $2.05 a share, compared with $1.38 billion, or $1.48 a share, in the year-ago period. Revenue surged to $4.58 billion from $3.24 billion in the year-ago quarter.

That 41% gain was “due to strong demand in industrial, automotive and personal electronics,” said Rich Templeton, Texas Instruments chairman and chief executive, in a statement.

Analysts surveyed by FactSet had forecast earnings of $1.83 a share on revenue of $4.36 billion, based on the company’s outlook of $1.68 to $1.92 a share on revenue of $4.13 billion to $4.47 billion.

Texas Instruments ranks as a major supplier of chips and electronic components for automobiles, one of the hardest-hit end markets of the global chip shortage triggered by COVID-19.

For the auto industry, the company makes components that not only power advanced driver assistance systems and touch-screens but practically every other aspect of a modern automobile’s function from keyless entry systems to things like lights and climate control systems.

Read: The chip crunch marches on, but one sector could be in store for relief

While Texas Instruments doesn’t break out auto product sales specifically, the auto industry uses components from both the company’s analog and embedded processor categories. Sales of analog electronics, which convert real-world data such as sound or temperature into digital data, jumped 42% to $3.46 billion from the year-ago period, while analysts had forecast $3.33 billion. Sales of embedded processors, which take that digital data and use it to perform specific tasks, similarly surged 43% to $780 million, with analysts expecting $753.1 million.

Texas Instruments shares declined 3% after hours, following a 3.5% rise in the regular session to close at $194.24.

Over the past 12 months, Texas Instruments’ stock price has advanced 43%. In comparison, the S&P 500 index  
is up 34%, the tech-heavy Nasdaq Composite Index 
has advanced 37%, while the PHLX Semiconductor Index 
has surged 57%.

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