Texas Instruments (TXN) Q4 Earnings Beat, Revenues Fall Y/Y
Texas Instruments TXN reported fourth-quarter 2022 earnings of $2.13 per share, beating the Zacks Consensus Estimate by 8.7%. Also, the figure exceeded the management’s guided range of $1.83-$2.11.
However, the bottom line declined 6% year over year and 13.8% from the previous quarter’s level.
TXN reported revenues of $4.67 billion, which surpassed the Zacks Consensus Estimate of $4.59 billion. Further, the figure was within the management’s guided range of $4.4-$4.8 billion.
However, it decreased 3% from the year-ago quarter’s level and 11% sequentially. This was attributed to a weak demand environment. The company witnessed sluggishness in its Analog and Other segments.
On a sequential basis, Texas Instruments suffered from widespread weakness in the industrial, personal electronics, communication equipment and enterprise systems markets.
Nevertheless, it experienced sequential growth in the automotive end market which remains a positive.
Also, Embedded Processing segment delivered strong performance on a year-over year basis, which was another positive.
We note that Texas Instruments’ efficient manufacturing strategies and consistent returns to shareholders are likely to instill investors’ optimism on the stock. Its substantial investments in growth avenues and competitive advantages are other positives.
Shares of Texas Instruments have gained 2.1% over the past year against the industry’s decline of 17.1%.
Texas Instruments Incorporated Price, Consensus and EPS Surprise
Texas Instruments Incorporated price-consensus-eps-surprise-chart | Texas Instruments Incorporated Quote
Segments in Detail
Analog: Revenues of $3.6 billion were generated from the segment (76.2% of total revenues), down 5% from the year-ago quarter’s level.
Embedded Processing: Revenues summed $837 million (17.9% of total revenues), up 10% year over year.
Other: Revenues totaled $275 million (5.9% of total revenues). The figure was down 11% from the prior-year quarter’s level.
Operating Details
Texas Instruments’ gross margin of 66.1% contracted 320 basis points (bps) from the year-ago quarter’s level.
As a percentage of revenues, selling, general and administrative expenses expanded 80 bps year over year to $429 million in the reported quarter.
Research and development expenses of $434 million expanded 120 bps from the year-ago quarter’s level as a percentage of revenues.
The operating margin was 46.6%, which contracted 520 bps from the prior-year quarter’s number.
Balance Sheet & Cash Flow
As of Dec 31, 2022, the cash and short-term investment balance was $9.07 billion compared with $9.09 billion as of Sep 30, 2022.
At the end of the reported quarter, TXN had a long-term debt of $8.2 billion compared with $7.4 billion in the prior quarter.
Current debt was $500 million at the end of fourth-quarter 2022 compared with $499 million at the end of third-quarter 2022.
Texas Instruments generated $2.04 billion of cash from operations, down from $2.8 billion in the previous quarter.
Capex was $967 million in the reported quarter. Free cash flow stood at $1.08 billion.
Texas Instruments paid out dividends worth $1.12 billion in the reported quarter. TXN repurchased shares worth $848 million.
Guidance
For first-quarter 2023, Texas Instruments expects revenues between $4.17 billion and $4.53 billion. The midpoint of this range is below the Zacks Consensus Estimate of $4.41 billion.
Texas Instruments expects earnings within $1.64-$1.90 per share. The Zacks Consensus Estimate for the same is pegged at $1.83 per share.
Zacks Rank and Stocks to Consider
Currently, Texas Instruments carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the broader Zacks Computer & Technology sector are Agilent Technologies A, Arista Networks ANET and Asure Software ASUR. While Agilent Technologies sports a Zacks Rank #1 (Strong Buy), Arista Networks and Asure Software carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Agilent has gained 10.5% in the past year. A’s long-term earnings growth rate is currently projected at 10%.
Arista Networks has lost 5.7% in the past year. The long-term earnings growth rate for ANET is currently projected at 17.5%.
Asure Software has gained 35.8% in the past year. The long-term earnings growth rate for ASUR is currently projected at 23%.
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