What's in Store for Texas Instruments' (TXN) Q3 Earnings?

Texas Instruments TXN or TI is scheduled to report third-quarter 2020 results on Oct 20, after market close. In the last reported quarter, TI delivered an earnings surprise of 68.2%.

For the to-be-reported quarter, the Zacks Consensus Estimate for earnings has remained stable at $1.25 per share over the past 30 days. However, it indicates a decline of 16.11% from the year-ago reported figure.

The consensus mark for revenues is pegged at $3.41 billion, implying a decline of 9.50% from the year-ago reported figure.

Let’s see how things have shaped up for this announcement.

TI’s compelling product line and manufacturing efficiencies, which include growing 300-millimeter Analog output, are likely to have helped this segment achieve growth during the quarter. However, weak performance of high-volume and power product lines may have affected its earnings.

Markedly, demand for PCs and servers that power data centers is expected to have increased in the quarter to be reported as people are increasingly working from home due to the pandemic.

However, weak performance of processors and connected microcontrollers, along with reduced factory loadings might have affected earnings in the to-be-reported quarter.

Also, weak auto sales resulting from the U.S.-China trade war and COVID-19 pandemic are expected to have impacted the company in the quarter.

The Zacks Consensus Estimate for Embedded Processing revenues is currently pegged at $569 million, suggesting a decrease of 21.4% from the year-ago quarter. For the Analog segment, the Zacks Consensus Estimate for revenues is currently pegged at $2.57 billion, indicating a 3.9% year-over-year increase.

For third-quarter 2020, Texas Instruments expects revenues between $3.26 billion and $3.54 billion. Earnings are expected in the range of $1.14-$1.34 per share. The guidance includes an estimated $10 million discrete tax benefit.

Texas Instruments Incorporated Price and Consensus

Texas Instruments Incorporated Price and Consensus

Texas Instruments Incorporated price-consensus-chart | Texas Instruments Incorporated Quote

Overall Picture

TI has always been a well-executed company. Management has been focused on increasing its free cash flow per share and strengthening competitive advantages. However, increasing competition in the auto and industrial space, along with unfavorable currency impact might have hurt the company’s third-quarter performance.

Also, the coronavirus pandemic is likely to impact the upcoming results.

What Our Model Says

Our proven model does not predict an earnings beat for Texas Instruments this time around. 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. That is not the case here.

Currently, the company has a Zacks Rank #4 (Sell) and an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to Consider

Here are a few stocks that you may also want to consider, as our model shows that these have the right combination of elements to post an earnings beat in the quarter to be reported.

TE Connectivity Ltd. TEL has an Earnings ESP of +3.37% and a Zacks Rank #2.

Netflix, Inc. NFLX has an Earnings ESP of +2.39% and holds a Zacks Rank of 3.

MSCI Inc. MSCI has an Earnings ESP of +0.83% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

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