Texas Instruments Q1 profit falls 11% but beats estimates

Texas Instruments (NASDAQ: TXN) reported an 11% drop in earnings for the first quarter of 2019 as slow demand for its products across most markets hurt revenue. However, the results exceeded analysts’ expectations. The company guided earnings and revenue for the second quarter within the consensus estimates range.

Net income for the quarter dropped 11% to $1.22 billion and earnings fell 7% to $1.26 per share. Revenue declined 5% to $3.6 billion as demand for its products continued to slow across most markets.

Looking ahead into the second quarter, the company expects revenue in the range of $3.46 billion to $3.74 billion and earnings in the range of $1.12 to $1.32 per share, which includes an estimated $10 million discrete tax benefits. For 2019, the company’s annual operating tax rate is expected to be about 16%.

In core businesses, Analog revenue for the first quarter declined by 2% year-over-year due to High Volume and Power despite an increase in Signal Chain. Embedded Processing revenue dropped by 14% from the same quarter a year ago due to lower demand for Processors and Connected Microcontrollers.

In the past twelve months, the company has returned $8 billion to owners through stock repurchases and dividends. The company’s strategy is to return all its free cash flow to owners. Over the last twelve months, Texas Instruments’ dividends represented 45% of free cash flow, underscoring their sustainability.

Also read: Lam Research Q3 earnings preview

Cash flow from operations of $7.2 billion for the trailing 12 months again underscored the strength of the business model. Free cash flow for the trailing 12 months was $6 billion, or 38.4% of revenue. This reflects the quality of the product portfolio, as well as the efficiency of the manufacturing strategy, including the benefit of 300-millimeter Analog production.

Shares of Texas Instruments ended Tuesday’s regular session up 1.24% at $116.38 on the Nasdaq. Following the earnings announcement, the stock inched up over 3% in the after-market session.

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