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Texas Instruments Announces Pricing of Senior Notes Due 2039

Zacks Equity Research
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Texas Instruments Incorporated TXN or TI recently announced an offering of senior unsecured notes aggregating $750 million. The notes carry an interest rate of 3.875% and are scheduled to mature on Mar 15, 2039. 

The company stated that the transaction proceeds will be used for general corporate purposes.

Barclays Capital, J.P. Morgan Securities, MUFG Securities Americas, Citigroup Global Markets, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Mizuho Securities and Morgan Stanley & Co. are acting as joint book-running managers for the purpose.

Cash Position

At the end of fourth-quarter 2018, its cash and short-term investments totaled $4.2 billion, down from $5.1 billion at the end of the prior quarter. Long-term debt was approximately $4.3 billion, flat sequentially.

The company generated $2.1 billion in cash from operations, spending $323 million on capex, $2 billion on share repurchases and $736 million on cash dividends. Free cash flow at the end of the fourth quarter was $1.8 billion.

We believe that the company has a strong balance sheet, which will help it to capitalize on investment opportunities and pursue strategic acquisitions, further improving growth prospects. In our view, the senior notes’ offering will bring down the company’s cost of capital, in turn strengthening the balance sheet and supporting growth.

These notes should provide financial flexibility as well as propel long-term growth.

Bottom Line

Texas Instruments is one of the largest suppliers of analog and digital signal processing integrated circuits. The company’s compelling product line-up, increasing differentiation in business and low-cost 300mm capacity are anticipated to drive earnings over the long term.

Its margins should continue to expand because of the secular strength in auto and industrial markets, a stronger mix of analog and embedded processing products, benefits of restructuring actions and more than 300mm capacity coming online. Moreover, the semiconductor giant is poised to gain from the growing market for Internet of Things.

However, increasing competition from Analog Devices, NVIDIA Corporation and Applied Materials remains a concern.

Zacks Rank and Stocks to Consider

Texas Instruments currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader technology sector include Expedia Group, Inc. EXPE, AMETEK, Inc. AME and Inphi Corporation IPHI, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings growth rate for Expedia, AMETEK and Inphi is projected to be 13.4%, 9.6% and 18.5%, respectively.

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