Texas Instruments Inc.
) is scheduled to announce its second-quarter fiscal 2012 results
on July 23, 2012, and we notice downward movements in analyst
Texas Instruments delivered a decent first quarter with pro forma
earnings per share of 42 cents exceeding the Zacks Consensus
Estimate by 13 cents.
The company reported revenue of $3.12 billion, which was down 8.7%
sequentially but just over the revised guidance range of $2.99
billion - $3.11 billion. The weakness in other areas was partially
offset by a full quarter of National's contribution and a
stronger-than-expected wireless business.
Texas Instruments' gross margin was 49.7%, up 379 basis points
(bps) sequentially, benefitting from the insurance claim received.
However, it declined 189 bps from the year-ago quarter, mainly on
account of low utilization rates as factory loadings stayed at
Recently, the company narrowed its revenue and earnings
expectations for the second quarter of 2012.
The chipmaker now expects sales of $3.28-$3.42 billion versus its
previous guidance range of $3.22-$3.48 billion. The earnings
outlook has also been narrowed to 32-36 cents per share from the
previous guidance of 30-38 cents.
For 2012, TI expects R&D expenses of $2.0 billion, capex of 0.7
billion, depreciation of $1.0 billion and an annual effective tax
rate of 28% (could change with re-instatement of federal R&D
tax credit that expired in 2011-end).
(Detailed earnings results can be viewed in the blog titled:
Order Trends Point To Growth at TI
Agreement of Analysts
Out of the 20 analysts providing estimates, none revised the
estimate for the second quarter in the last 30 days. Over the same
period, 8 out of 23 analysts made downward revisions for fiscal
The analysts lowered their estimates due to their negative view on
weak macro-economic conditions and channel inventory
destocking. Further, the analysts are of the opinion that the
wireless segment will not perform well in the upcoming quarter due
to further declines in the baseband business, which the company
expects to phase out completely by the end of the year.
However, longer term, the analysts believe that TXN's analog and
embedded businesses will continue to drive growth for the company.
They also see potential margin expansion opportunities from the
company's cost cutting initiatives along with growth in
higher-margin businesses. Additionally, the analysts contend that
300mm RFAB and cost synergies from the NSM acquisition will likely
lead to margins and earnings upside going forward.
Magnitude of Estimate Revisions
In the past 30 days, the Zacks Consensus Estimate increased by a
penny to 39 cents for the second quarter, but was down 3 cents to
$1.74 for fiscal 2012.
Over the 90-day period, the Zacks Consensus Estimate remains
unchanged for the second quarter and was up 1 cent for fiscal 2012.
We remain optimistic about Texas Instruments' compelling product
line, the increased differentiation in its business and its
lower-cost 300mm capacity. Also, the addition of National
Semiconductor strengthens its product lineup and brings on board
We also believe that some of the new designs (analog and embedded
processing products) getting into volume production should help the
gross margin to move up toward its long-term target of 55%.
However, we remain concerned about the macro weakness, TI's larger
exposure to wireless communications infrastructure, and elevated
Increasing competition from
Maxim Integrated Products
) is also a matter of concern.
Hence, we expect the company to report in line with the lowered
guidance provided in its mid-quarter update.
We, therefore, have a short-term Sell recommendation (Zacks Rank
#4) on Texas Instruments shares.
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