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Texas Instruments Q1 Earnings: Positive Surprise for Investors!

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Texas Instruments (NASDAQ:TXN) stock rose around 2% in the extended trading session on Tuesday. The semiconductor company reported better-than-expected first-quarter results on Tuesday. Texas Instruments beat analysts’ consensus revenue and earnings estimates in the first quarter.

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Texas Instruments’ Q1 performance

In the first quarter, Texas Instruments’ adjusted EPS rose 1.6% YoY (year-over-year) to $1.24 compared to $1.22 a year ago. The company beat analysts’ consensus estimate of $1.00, according to data from Thomson Reuters. In the first quarter, Texas Instruments’ reported $3.3 billion in revenues—down 7.4% YoY but higher than analysts’ consensus estimate of $3.17 billion.

In the first quarter, the company’s free cash flow fell 19.4% YoY to $690 million. Texas Instruments’ operating cash flow decreased by 23.1% YoY to $851 million. Meanwhile, the company’s capital expenditures fell by 35.9% YoY to $161 million in the first quarter. Texas Instruments returned $841 million to shareholders in the form of dividends. On Tuesday, the company’s dividend yield was 3.37%.

Growth projection for 2020

In a press release, Texas Instruments CEO Rich Templeton said, “With a COVID-19 recession likely upon us, and with reduced visibility of customer demand, we are using the 2008 financial crisis to model our second quarter outlook. To reflect the increased uncertainty, we have expanded the range of our guidance.” He also said, “TI’s second quarter outlook is for revenue in the range of $2.61 billion to $3.19 billion, and earnings per share between $0.64 and $1.04, which includes an estimated $10 million discrete tax benefit. We expect our annual operating tax rate to be about 14% in 2020.”

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Analysts expect the company to report revenue of $3.02 billion in the second quarter—a fall of 17.7% from $3.7 billion in the same quarter the previous year. Analysts expect that the company will report an adjusted EPS of $0.90 during the quarter compared to $1.36 in the same quarter in 2019. Currently, analysts expect -12.8% and 11.7% growth in Texas Instruments’ 2020 and 2021 revenues, respectively. Analysts also expect an adjusted EPS of $4.02 and $4.97 in 2020 and 2021, respectively.

Analysts’ recommendations for Texas Instruments

Based on Reuters data, among the 36 analysts tracking Texas Instruments stock, 36% recommend a “buy,” 56% recommend a “hold,” and 8% recommend a “sell.” Analysts’ mean target price for the stock is $119.50, which implies a potential upside of 11.8% based on its last closing price.

Many analysts revised their target price for Texas Instruments stock after its first-quarter earnings results.

  • RBC decreased its target price from $135 to $125.
  • J.P. Morgan decreased its target price from $145 to $118.
  • Oppenheimer decreased its target price from $140 to $120.
  • Mizuho decreased its target price from $112 to $111.
  • Rosenblatt decreased its target price from $150 to $135.

Advanced Micro Devices (NYSE:AMD) and Intel’s (NASDAQ:INTC) target prices suggest potential returns of -3.9% and 12.5%, respectively.

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Stock returns

Texas Instruments stock closed 4.2% lower on Tuesday and stood at $106.84. At the closing price, the company’s market cap is about $99.8 billion. The stock is trading 21.3% lower than its 52-week high of $135.70 and 14.8% higher than its 52-week low of $93.09. Overall, the company has lost 7.5% in the last 12 months.

Based on the closing price on Tuesday, Texas Instruments stock was trading 1.0% above its 20-day moving average of $105.83. The stock is also trading 4.4% below its 50-day moving average of $111.78 and 10.4% below its 100-day moving average of $119.30. Texas Instruments’ 14-day RSI (relative strength index) score is 49. The score shows that the stock isn’t oversold or overbought.

AMD and Intel stocks delivered negative returns of 7.1% and 4.8% on Tuesday. AMD will likely release its first-quarter results on April 22. Wall Street analysts expect AMD’s first-quarter reported revenue to rise by 40.2% to $1.8 billion. They expect an adjusted EPS of $0.18 for the quarter compared to $0.06 in the first quarter of 2019. Intel will likely report an adjusted EPS of $1.28 on revenue of $18.7 billion.

On Tuesday, the S&P 500 and the Dow Jones Industrial Average fell by 3.1% and 2.7%, respectively. Read US Stock Market Crash Reversal: Is a Double Bottom Next? to learn more.

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