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Texas Instruments (TXN) Q4 earnings preview: Weak demand to hurt the results

Texas Instruments Incorporated (NASDAQ: TXN) is set to release its fourth-quarter 2019 earnings results on Wednesday after the market closes. The results will be hurt by the weakness in the overall demand, the increasing competition, and frequently changing customer demand.

The company continues to invest in manufacturing technologies for ensuring a consistent supply of products for its customers and also allows it to invest in technology that differentiates the features of products. The majority of the company’s resources are invested in Analog and Embedded Processing.

Read: Western Digital stock in recovery stance

The changes in customer demand could be the driving factor for top-line growth. The customer demand is evidenced by fluctuations in shipment volumes. The top line and margins are impacted by changes in demand for high or low priced products. A significant portion of operating cost is fixed as it owns much of its manufacturing capacity.

Texas believes the industrial and automotive markets represent the best growth opportunities. And, electrification and autonomous driving could be shaping its future growth. The free cash flow growth is important for maximizing shareholder value over the long term.

At the end of the third quarter, total cash was $5.07 billion while the total debt stood at $6.15 billion. The company remained cautious in increasing its debt more than the cash. The primary source of liquidity is cash flow from operations, while cash and cash equivalents, short-term investments, and revolving credit facilities are considered as additional sources.

Analysts expect the company’s earnings to dip by 20.50% to $1.01 per share and revenue will drop by 13.50% to $3.21 billion for the fourth quarter. The company has surprised investors by beating analysts’ expectations in all of the past four quarters. The majority of the analysts recommended a “hold” rating with an average price target of $128.11.

Read: Wipro Q3 earnings snapshot

For the third quarter, Texas Instruments posted a 9% drop in earnings due to broad-based weakness in the overall demand of its product portfolio as well as macro-environment uncertainty. The top line declined by 11% as most markets weakened further. In core businesses, Analog revenue declined 8% and Embedded Processing declined 19% from last year.

For the fourth quarter, the company expects revenue in the range of $3.07-3.33 billion and earnings in the range of $0.91-1.09 per share, which includes an estimated $5 million discrete tax benefits. For 2019, the company’s annual operating tax rate is still predicted to be about 16%.

Listen to on-demand earnings calls and hear how management responds to analysts’ questions

Netflix (NFLX) Q4 earnings preview: Subscriber growth and competition in focus

Netflix Inc. (NASDAQ: NFLX) is slated to report fourth quarter 2019 earnings results on Tuesday, January 21, after the market closes. Analysts project earnings to increase to $0.52 per share from $0.30 per share reported a year earlier. Revenue is expected to see a growth of 30% year-over-year to $5.45 billion.

The fourth quarter report will be an interesting one, in particular because it will give investors a sense of how the company’s subscriber numbers have been impacted by the launch of two important rivals Disney + and Apple TV +. Last quarter, Netflix missed the guidance for subscriber additions.

Netflix reports Q3 2019 earnings results

In addition, the streaming space is set to get more competitive with the upcoming launches of more services such as HBO Max. In this scenario, it will be worth noting what Netflix’s strategy for the upcoming fiscal year will be in order to maintain its ground amid the rising competition.

Although expansion opportunities appear to be bleak within the US for the streaming giant, there seem to be ample opportunities to expand its footprint in international markets. Netflix’s quarterly results are likely to benefit from this opportunity. The company’s game plan of investing in original content in order to reduce dependency on content from other studios might also prove beneficial to results.

In the third quarter of 2019, Netflix topped earnings expectations while revenues matched estimates. Total revenues rose 31% to $5.25 billion while EPS totaled $1.47. Total paid net adds were 6.8 million.

Also read: Netflix Q3 2019 Earnings Conference Call Transcript

For the fourth quarter of 2019, Netflix expects revenues to grow 30% to $5.4 billion. Net income is expected to be $232 million, or $0.51 per share. Global paid net adds are expected to be 7.6 million, with 0.6 million in the US and 7 million internationally. Streaming ARPU is expected to grow 9%.  

Starting from the fourth quarter, the company will report revenue and membership by region. The regional divisions will be Asia Pacific (APAC), Europe, Middle East & Africa (EMEA), Latin America (LATAM), and the US and Canada (UCAN).

Shares of Netflix have fallen 4% over the past 12 months. The majority of analysts have rated the stock as Buy and it has an average price target of $365.85.

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