Apr 23, 2019
Texas Instruments' Forecast Stokes Optimism for a Chip Revival
(Bloomberg) -- Texas Instruments Inc. gave an upbeat forecast for second-quarter sales and profit, bolstering optimism that the electronics industry is starting to emerge from a slide in demand.
Earnings will be as much as $1.32 a share on revenue as high as $3.74 billion, the Dallas-based company said Tuesday in a statement. On average, analysts predicted earnings of $1.24 a share and sales of $3.66 billion, according to data compiled by Bloomberg. First-quarter results also topped projections.
As one of the first chip companies to report for the March quarter -- and with the biggest customer and product lists in the $470 billion semiconductor industry -- Texas Instruments provides investors with a view of demand across the electronics industry. The company’s chips are built into almost everything that has an "on" switch.
Semiconductor stocks have rallied this year as investors bet on industry executives’ assurances that growth will return in the second half. Analysts have been less positive, and before Tuesday’s results, Texas Instruments’ management had taken a more conservative approach, saying that they didn’t have the visibility into how demand would be affected by issues like the China-U.S. trade dispute.
The world’s sixth-largest chipmaker reported first-quarter net income fell to $1.22 billion, or $1.26 per share, from $1.37 billion, or $1.35 a share, in the same period a year earlier. Revenue slipped 5.1 percent to $3.59 billion from $3.8 billion. Analysts had estimated a profit of $1.13 a share on sales of $3.48 billion.
Texas Instruments shares climbed about 4 percent following the report. They had gained 1.2 percent to $116.38 at Tuesday’s close, leaving them up 23 percent this year, compared with a 36 percent gain in the benchmark Philadelphia Stock Exchange Semiconductor Index.
After three years of growth, analysts are predicting Texas Instruments’ revenue will shrink this year as markets such as automotive slow down and customers work through a buildup of unused parts. Inventory sitting around for months can depress selling prices, and if there’s a rebound in demand it delays how that flows into new orders.
Two of Texas Instruments’ biggest markets, industrial and automotive, are currently "relatively weak," Tore Svanberg, an analyst at Stifel Nicolaus, wrote in a report. The company is concentrating its research and design efforts in those businesses and counting on them for future growth.
Texas Instruments’ analog chips perform the fundamental task of translating real-world inputs, like sounds and touch, into electronic signals. Unlike chips from Intel Corp. and Qualcomm Inc., Texas Instruments’ semiconductors don’t cost tens of millions of dollars to develop and aren’t typically at risk of becoming obsolete quickly. That means the company is less vulnerable to sudden swings in demand or competitive pressure.
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