Texas Instruments Incorporated (NASDAQ: TXN) reported a 9% decrease in earnings for the third quarter of 2019 due to broad-based weakness in the overall demand of its product portfolio as well as macro-environment uncertainty. The bottom line exceeded analysts’ expectations while guiding fourth-quarter revenue and earnings below consensus estimates.
Net income declined by 9% to $1.43 billion or $1.49 per share. Revenue dropped by 11% to $3.77 billion as most markets weakened further.
In core businesses, Analog revenue declined 8% and Embedded Processing declined 19% from the same quarter a year ago. The top line was hurt by decreases in High Volume, Power, and Signal Chain as well as low demand for Connected Microcontrollers and Processors.
Looking ahead into the fourth quarter, the company expects revenue in the range of $3.07 billion to $3.33 billion and earnings in the range of $0.91 to $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%.
The company has returned $7.4 billion to owners in the past 12 months through stock repurchases and dividends. Over the last 12 months, dividends represented 48% of free cash flow. In September, the company announced a dividend hike of 17%. Together, stock repurchases and dividends reflect its continued commitment to returning all free cash flow to owners.
The company’s cash flow from operations of $7 billion for the trailing 12 months again underscored the strength of its business model. Free cash flow for the trailing 12 months was $6 billion and 41% of revenue. This reflects the quality of its product portfolio as well as the efficiency of its manufacturing strategy, including the benefit of 300-millimeter Analog production.
Texas Instruments has been struggling in the semiconductors industry as the market demand remained weak, particularly in the end markets. Also, the stiff competition in the industry has been increasing the impact on the company’s products and prices. The company remained clueless about customer demand, which continues to change frequently and differs from the forecasts.