Can Texas Instruments Sustain Its Earnings Beat Trend in Q2?

Texas Instruments Incorporated TXN is scheduled to report second-quarter 2020 earnings after market close on Jul 21. The semiconductor and electronics manufacturer’s quarterly earnings surpassed the Zacks Consensus Estimate in the last seven quarters. In fact, shares of Texas Instruments, which have soared 4.4% since the beginning of this year, have outperformed the broader S&P 500 Index’s rise of just 0.3%.

Factors Impacting the TXN Stock

Texas Instruments started the year on a positive note, beating the Zacks Consensus Estimate for first-quarter 2020 earnings and revenues. In second-quarter 2020, the company witnessed strong demand for its products and services, mostly because of the diverse end markets it provides, along with strong seasonal demand experienced during the second and third quarters.

The company’s customer base is quite huge, considering that it serves individuals and corporations as well as infrastructure providers. In addition, the emergence of 5G technology is also supporting the performance of Texas Instruments’ analog products in the communication equipment market. These make Texas Instruments’ revenue stream relatively stable.

The company is also one of the largest suppliers of analog and digital signal processing integrated circuits. Texas Instruments’ compelling product line-up, competent manufacturing strategies and low-cost 300mm capacity are expected to drive its earnings in the long term. In addition, its focus on innovation of its product portfolio across both the Analog and Embedded Processing segments are strong factors pushing it toward a good quarterly report.

Finally, the company has a keen eye for Internet of Things.Much of the company’s recent growth in the embedded business has been a result of microcontrollers, which are some of the enabling products. IoT offers massive scope, especially to companies that manufacture semiconductors. In addition, Texas Instruments’ partner program based on its Internet of Things Cloud ecosystem is also promising.

Q2 Earnings and Revenue Expectations

The Zacks Consensus Estimate for Texas Instruments’second-quarter 2020 earnings is 87 cents per share. The Zacks Consensus Estimate for the company’s Q2  revenues is $2.94 billion.

Although these expected figures are lesser than what the company reported during the year-ago quarter, these are quite encouraging right now, given the public health crisis that has taken a toll on the global financial markets and businesses.

In fact, the Zacks Consensus Estimate for Texas Instruments’ current-year earnings has moved 0.5% north in the past 60 days. Texas Instruments, which belongs to the Zacks Semiconductor - General industry, has an expected earnings growth rate of 20.5% for the next year.

Finally, our proprietary model predicts an earnings beat for Texas Instruments in second-quarter 2020. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. In this case, the stock fulfills the criteria. Texas Instruments has an Earnings ESP of +6.19% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Texas Instruments Incorporated Price and EPS Surprise

Texas Instruments Incorporated Price and EPS Surprise

Texas Instruments Incorporated price-eps-surprise | Texas Instruments Incorporated Quote

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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