Earnings Preview: Texas Instruments

Texas Instruments (TXN) is expected to report Q2 earnings after market close Monday, July 21, with a conference call scheduled for 5:30 pm ET.

Guidance

The consensus estimate is 46c for EPS and $3.39B for revenue, according to First Call.

Texas Instrument's mid-quarter update pointed too an unseasonably weak wireless environment in Q2. At that time, the company narrowed its Q2 EPS forecast to 43c to 47c, on revenue of $3.33B to $3.46B. Semiconductor revenue is expected to range from $3.17B to $3.28B; and Education Technology revenue guidance for the quarter remained unchanged at $160M to to $180M.

Key Issues

Last month, TI slightly raised the midpoint of its revenue forecast but noted that it continues to deal with a weaker market environment. In its mid-quarter update, TI called its Q2 wireless-handset revenue "unseasonably weak," after an 18% sequential decline in Q1, as its biggest customer, Nokia (NOK), and another major customer, L.M. Ericsson Telephone Co. (ERIC), moved to diversify their supplier base. Meanwhile, TI said its analog business continues to grow; the company has been increasing its focus on analog chips, which are often more profitable than digital varieties.

Analyst Views

On July 10, PacCrest recommended investors cover their short positions in TI and focus on the company's analog business, as the Wireless weakness is priced into shares. Jefferies, in a recent note, said it believes Texas Instruments is still a top semiconductor company, but the firm is cautious about the stock due to increased competition facing the company and their forecast that the company will lose market share in its wireless segment.

Looking forward: For Q3, Canaccord Adams expects guidance below consensus of 51c on $3.56B in revenue, impacted by pricing pressure and a weak handset market. Cowen expects TI to offer Q3 revenue guidance in line with normal seasonality.

Comments

[factchecker]

Face TI has said they are going analog for the future. These are usually low price chips. For TI to continue in the future, they must continue to close their older fabs in the US and use overseas foundries. I hope that TI will announce closing of another fab this year to show they are facing the future and turn around their disappointing stock prices.