Texas Instruments (NASDAQ:TXN) reported second-quarter 2019 earnings of $1.36 per share, which surpassed management’s guided range of $1.12-$1.32.
Excluding discreet tax benefit of 7 cents from the reported figure, earnings of $1.29 per share comfortably beat the Zacks Consensus Estimate of $1.21.
However, the reported figure decreased 2.8% year over year but improved 7.9% sequentially.
The company delivered revenues of $3.668 billion, outpacing the Zacks Consensus Estimate of $3.605 billion. It was also up 2.1% from the previous quarter. Further, the figure came within the company’s guided range of $3.46-$3.74 billion. However, it declined 8.7% from the year-ago quarter.
Sluggishness in the company's Analog and Embedded Processing segments owing to weak demand affected the top line.
Nevertheless, the company’s focus on innovation of product portfolio across both the segments is evident from growing research and development (R&D) spending. This continues to be a key catalyst.
Moreover, the company remains confident on portfolio strength, efficient manufacturing strategies and optimized capital allocation in growth areas. Additionally, Texas Instruments continues to increase investments in the automotive and industrial markets which are anticipated to yield good returns.
We note that shares of the company have surged 7.19% in the after-hours trading. This can primarily be attributed to better-than-expected results in the second quarter despite slowdown in chip sales globally. Further, the company’s strong outlook for third-quarter 2019 revenues is instilling investor confidence.
Coming to the price performance, Texas Instrument has gained 27.1% over a year outperforming the industry’s rally of 19.2%.
End-Market in Detail
Texas Instrument’s revenues were down by upper-single digit in the industrial and automotive market. This can be attributed to softness in demand environment.
It also affected the company’s presence in personal electronics market where revenues were down by low-double digits.
Further, the company witnessed sluggishness in the communications equipment and enterprise systems market during the reported quarter.
Segments in Detail
Analog: The company generated $2.534 billion from this segment (69.1% of total revenues), which decreased 5.8% from the year-ago quarter. This can be attributed to weak performance of high-volume, signal chain and power product lines.
Embedded Processing: This segment generated $790 million revenues (21.5% of total revenues), down 16% year over year. This was primarily owing to weak performance of processors and connected microcontrollers.
Other: Revenues in this segment were $344 million (9.4% of total revenues). The figure was down 10% from the year-ago quarter.
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