Analysts: Texas Instruments Earnings Preview Doesn’t Change Our Minds

Shares of Texas Instruments (NYSE:TXN) fell more than 1 percent Monday ahead of the company’s first-quarter results announcement scheduled for after close. However, analysts do not seem too concerned with the drop given that TI’s performance is expected to improve due to overall growth in the sector.

Texas Instruments completed its biggest acquisition, a $6.6 billion takeover of National Semiconductor during which the semiconductor pioneer fell 9.6 percent in that year. However, TI has gained more than 10 percent this year. The company is a leader in analog chips for communications, and its acquisition of National has made TI strong among communications equipment makers and defense contractors.

Analysts expect TI to report earnings to drop around 50 percent to $324.6 million or 28.6 cents a share, from $666 million, or 55 cents a year ago. Revenue is expected to fall around 10 percent to $3.06 billion from a year earlier. On March 8, TI warned that the quarter was  more difficult than expected and predicted revenue would range only between $2.99 billion and $3.11 billion, with net income ranging between 15 cents and 19 cents a share.

TI’s problem could be customer-specific when compare to Qualcomm (NASDAQ:QCOM). Last week, Qualcomm reported second quarter net income more than double to $2.23 billion, or $1.28 a share, as revenue rose 28 percent to $4.94 billion. Qualcomm has announced that it is facing problems in the current quarter because its Asian chip foundries are running at full capacity and may not have room to make its chips. By contrast, TI manufactures most of its own chips.

Analysts believe TI’s performance will improve because of overall growth in the sector. Wedbush Securities analyst Betsy Van Hees rates the company “Outperform” with a $38 price target, citing that TI should outgrow the overall industry due to market share gains later this year. Jefferies analyst Mark Lipacis rates TI a “Buy” with a target of $40, attributing demand for TI’s OMAP5 multicore chip designed into many new smartphones and tablets for shipment later in 2012.

TI provides its chips for the majority of the biggest suppliers, including Ericsson (NASDAQ:ERIC), Motorola Mobility (NYSE:MMI) and LG Group. TI’s chips are also designed into the cars of Ford (NYSE:F), Chrysler, and General Motors (NYSE:GM), which have reported strong sales.

As of December 31, TI had cash and investments of $3.2 billion.

To contact the reporter on this story: staff.writers@wallstcheatsheet.com To contact the editor responsible for this story: editors@wallstcheatsheet.com

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