Texas Instruments Automotive Chips Strength Balances Weak Industrial Demand

Texas Instruments, the largest manufacturer of analog and embedded processors in America, reported better than expected fourth quarter results and also provided Q1 guidance that met analyst estimates but at the same time demand remains under pressure with customers working to reduce their inventory levels. The softer weaker quarter-over-quarter growth reflecting slowing demand spreading from personal electronics which was 24% of IT’s 2021 revenue to a more significant industrial markets which had 41% of revenue.  The automotive industry continues to be a source of strength for TXN, it grew by mid-single digits yr/yr in Q4, auto related sales comprised 25% of FY22 revs.

Texas Instruments

 Texas Instruments Inc. (NASDAQ: $TXN) Reported Earnings After Close Tuesday

Texas Instruments Q4 22 Earnings

Highlights

  • EPS: $2.13 (exp $1.98)
  • Revenue: $4.67B (exp $4.61B) contracted by 3.4% yr/yr
  • Sees Q1 Rev $4.17B To $4.53B (est $4.41B)
  • TXN’s largest end market, industrial (40% of FY22 revs) fell 10% decline in growth yr/yr.
  • Personal electronics (20%) slipped 15%
  • Communications equipment (7%) tumbled roughly 20%.
  • Gross margins fell 320 bps yr/yr, leading to TXN slightly missing analyst EPS forecasts. TXN’s adjusted EPS of $2.02 still surpassed the midpoint of its guidance of $1.83-2.11.

The issues came with guidance and weak demand.

Dividends and Stock Repurchases

TXN paid $1.1 bln in dividends and repurchased $848 mln of its stock in Q4, a sign of confidence by management in future cash flows.

MSFT: Stock Market Reaction

  • $174.73 ▼-174.73 -2.31 (1.31%) Premarket
  • $174.73 ▲ +11.52 (7.06%) YTD
  • $174.73 ▲ +0.77 (0.44%) Over year
  • $174.73 ▲ +55.29 (46.29%) Over 5 years
  • 52wk High $187.31
  • 52wk Low $142.38

Outlook

Looking ahead to Q1, TXN expects EPS of $1.64-1.90 and revs of $4.17-4.53 bln, both of which fell in line with consensus. However, TXN’s remarks spooked investors. The company expects a weaker-than-seasonal decline in Q1 across all end markets outside of automotive as customers continue to trim their inventories.

The benefits from the CHIPS Act should also begin flowing through TXN’s income statement.

Source: Texas Instruments

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