Texas Instruments (TXN) Q2 Earnings Beat, Revenues Down Y/Y
Texas Instruments TXN reported second-quarter 2020 earnings of $1.48 per share, which surpassed the Zacks Consensus Estimate by 68.2%. The bottom line was also higher than management’s guided range of 64 cents to $1.04 per share. Further, the figure improved 8.8% year over year and 19.3% sequentially.
The company reported revenues of $3.24 billion, which beat the Zacks Consensus Estimate by 9.3%. The top line also came within management’s guided range of $2.61-$3.19 billion.
However, the figure declined 12% from the year-ago quarter and 2.7% from the prior quarter.
Sluggishness in the company's Analog and Embedded Processing segments, and softness in the automotive market owing to coronavirus-led disruptions impacted the top line negatively.
Coming to the price performance, Texas Instruments has returned 4.3% on a year-to-date basis compared with the industry’s growth of 22.9%.
Nevertheless, uptrend in personal electronics and industrial markets acted as a tailwind for the company during the quarter under review.
However, uncertainties related to ongoing pandemic remain a concern.
Nevertheless, the company’s strong investments in new growth avenues, and research and development activities are positive.
Moreover, Texas Instruments is likely to address the rising unforecasted demand in the current scenario well on the back of short lead times and high availability of products for immediate shipment. Further, the company remains confident on its portfolio of long-lived products and efficient manufacturing strategies. Additionally, continuous returns to shareholders are likely to help the stock rebound in the near term.
End-Market in Detail
Texas Instrument’s revenues were down 40% in the automotive market on year-over-year basis owing to ongoing coronavirus pandemic.
Further, revenues in the communications equipment space decreased 15% from the year-ago quarter.
Nevertheless, the company witnessed 10% growth in the personal electronics market compared with the year-ago quarter owing to coronavirus induced increasing work-from-home trend.
Further, it exhibited year-over-year growth of 2% in the industrial market during the reported quarter, thanks to strong medical space.
Segments in Detail
Analog: The company generated $2.43 billion from this segment (75.1% of total revenues), which decreased 4% from the year-ago quarter. This can be attributed to weak performance of high-volume and power product lines during the reported quarter.
Embedded Processing: This segment generated $546 million revenues (16.9% of total revenues), down 31% year over year. This was primarily owing to weak performance of processors and connected microcontrollers.
Other: Revenues in this segment were $259 million (8% of total revenues). The figure was down 25% from the year-ago quarter.
Texas Instruments Incorporated Price, Consensus and EPS Surprise
Texas Instruments Incorporated price-consensus-eps-surprise-chart | Texas Instruments Incorporated Quote
Operating Details
Texas Instruments’ gross margin of 64.2% contracted 10 basis points (bps) from the year-ago quarter.
Selling, general and administrative (SG&A) expenses expanded 100 bps year over year to $401 million in the reported quarter. Further, research and development expenses expanded 110 bps from the year-ago quarter to $379 million.
Operating margin was 37.9%, contracting 320 bps from the prior-year quarter.
Balance Sheet & Cash Flow
As of Jun 30, 2020, cash and short-term investments balance came in $4.9 billion, which increased from $4.7 billion as of Mar 31, 2020.
At the end of the reported quarter, the company had long-term debt of $6.2 billion, up from $5.5 billion in the prior quarter.
The company generated $1.7 billion of cash from operations, up from $851 million in the previous quarter.
Capex was $130 million in the second quarter. Further, free cash flow stood at $1.6 billion.
Additionally, Texas Instruments paid out dividends worth $823 million during the reported quarter. Further, it repurchased shares worth $882 million.
Guidance
For third-quarter 2020, Texas Instruments expects revenues between $3.26 billion and $3.54 billion. The Zacks Consensus Estimate for revenues is pegged at $2.97 billion.
Earnings are expected in the range of $1.14 to $1.34 per share. The guidance includes an estimated $10 million discrete tax benefit. The Zacks Consensus Estimate for earnings is pegged at 91 cents per share.
Zacks Rank & Other Stocks to Consider
Currently, Texas Instruments carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the broader technology sector are Synaptics Incorporated SYNA, Advanced Micro Devices, Inc. AMD and Intel Corporation INTC. While Synaptics sports a Zacks Rank #1 (Strong Buy) at present, AMD and Intel carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth rate of AMD, Synaptics and Intel is pegged at 40.25%, 10% and 7.5%, respectively.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.1% per year.
These 7 were selected because of their superior potential for immediate breakout.
See these time-sensitive tickers now >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Intel Corporation (INTC) : Free Stock Analysis Report
Advanced Micro Devices, Inc. (AMD) : Free Stock Analysis Report
Texas Instruments Incorporated (TXN) : Free Stock Analysis Report
Synaptics Incorporated (SYNA) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
