Categories Earnings, Technology

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.

Also Read:  Earnings: Broadcom beats estimates in Q1, despite massive profit slump

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

Most Popular

Salesforce (CRM) Q1 2021 earning infographic

Salesforce (NYSE: CRM) reported first-quarter earnings results for fiscal 2021 after the regular trading hours on Thursday. The results were better than analysts' projections. Meanwhile, the stock fell over 3%

A visual dashboard of Nordstrom (JWN) Q1 2020 earnings results

Nordstrom (NYSE: JWN) swung to a loss in the first quarter of 2020 hurt by the COVID-19 related charges. The fashion retailer reported a loss of $3.33 per share compared

A visual representation of Ulta Beauty (ULTA) Q1 2020 earnings results

Ulta Beauty Inc. (NASDAQ: ULTA) reported its financial results for the quarter ended May 2, 2020, on Thursday after the market closes. The results missed analysts' expectations. The company slipped

Top