Why is Texas Instruments (TXN) up 15.9% since its last earnings report?

A month has passed since Texas Instruments (TXN) last reported earnings. Shares have risen about 15.9% in that time, outperforming the S&P 500.

Will the recent positive trend continue until the next earnings release, or will Texas Instruments slow down? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at the company’s most recent earnings report in order to better understand the important catalysts.

Texas Instruments’ first quarter results were better, revenues were lower y/y

Texas Instruments reported first-quarter 2024 earnings of $1.20 per share, missing the Zacks Consensus Estimate by 13.2%. This figure exceeded the recommended range of 96 cents – $1.16 per share.

However, this number decreased by 35% year-on-year and then by 19.5%.

TXN posted revenues of $3.66 billion, topping the Zacks Consensus Estimate of $3.61 billion. This amount was within management’s estimate of $3.45 billion to $3.75 billion.

Revenues were down 16% from the prior-year quarter and 10.2% sequentially.

The year-over-year decline was attributed to weaknesses in various end markets. The company has seen a slowdown in its analog, embedded computing and other segments.

On a sequential basis, Texas Instruments faced widespread weakness in the personal electronics, communications equipment and enterprise systems markets.

A serious problem was the sequential, mid-single-digit decline in the automotive market.

Another obstacle was another single-digit decline in the industrial market.

TXN’s investments in growth pipelines and competitive advantages, including manufacturing, technology, product portfolio expansion and consistent shareholder returns, are likely to instill investor optimism about the stock in the days ahead.

Segments in detail

Likewise, the segment generated revenues of $2.84 billion (77.5% of total revenues), down 14% from the prior-quarter level. The figure surpassed the Zacks Consensus Estimate of $2.69 billion.

Embedded Processing: Revenue was $652 million (17.8% of total revenue), down 22% year-over-year. This number is below the Zacks Consensus Estimate of $715.28 million.

Other: Total revenues were $173 million (4.7% of total revenues). The figure was down 33% from the prior-quarter level and missed the consensus estimate of $197.13 million.

Operational details

Texas Instruments’ gross margin of 57% decreased 820 basis points (bps) from the prior-year quarter’s level.

As a percentage of revenue, selling, general and administrative expenses increased 160 basis points year over year to $455 million in the reported quarter.

Research and development expenses of $478 million increased 270 basis points from year-ago quarter levels as a percentage of revenue.

Operating margin was 35.1%, down 910 basis points from the prior-year quarter.

Balance sheet and cash flow

As of March 31, 2024, the cash and short-term investment balance was $10.4 billion compared to $8.58 billion as of December 31, 2023.

At the end of the reported quarter, TXN’s long-term debt was $12.840 billion, compared to $10.624 billion in the prior quarter.

Current debt was $1.35 billion, up from $599 million at the end of the fourth quarter of 2023.

Texas Instruments generated $1.02 billion in cash from operations, up from $1.92 billion in the prior-year quarter.

During the reported quarter, capital expenditures were $1.25 billion and the company recorded free cash outflow of $231 million.

Texas Instruments paid $1.18 billion in dividends during the reported quarter. He bought back shares worth PLN 3 million.

Conductivity

In the second quarter of 2024, TXN expects revenue of $3.65 billion to $3.95 billion.

The company expects earnings per share to range from $1.05 to $1.25.

The company expects the effective tax rate to be approximately 13%.

How have estimates changed since then?

It turns out that estimate revisions have been trending upwards over the past month.

VGM results

Right now, Texas Instruments has a weak Growth Score of D, but its Momentum Score is slightly better at C. However, the stock is rated F on the Value side, putting it in the bottom 20% of the quintile for this investment strategy.

Overall, the company’s overall VGM score is F. If you’re not focused on one strategy, this score should interest you.

Perspectives

Estimates for this company are generally on an upward trend, and the magnitude of these revisions indicates a downward shift. Notably, Texas Instruments has a Zacks Rank #3 (Hold). We expect a linear rate of return on the stock over the next few months.

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