Texas Instruments Earnings: Margins SHRINK Again, Net Income FALLS

S&P 500 (NYSE:SPY) component Texas Instruments Incorporated (NASDAQ:TXN) reported its results for the second quarter. Texas Instruments designs and makes semiconductors that it sells to electronics designers and manufacturers all over the world.

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Texas Instruments Incorporated Earnings Cheat Sheet

Results: Net income for the semi-general fell to $446 million (38 cents per share) vs. $672 million (56 cents per share) a year earlier. This is a decline of 33.6% from the year-earlier quarter.

Revenue: Fell 3.6% to $3.33 billion from the year-earlier quarter.

Actual vs. Wall St. Expectations: Texas Instruments Incorporated fell short of the mean analyst estimate of 39 cents per share. Analysts were expecting revenue of $3.35 billion.

Quoting Management: “TI revenue in the second quarter was about as we had expected,” said Rich Templeton, TI’s chairman, president and CEO. “Our Analog and Embedded Processing segments grew sequentially, while our Wireless segment declined. Although we believe customers and distributors have low inventory levels, the global economic environment is causing both to become increasingly cautious in placing new orders. Our backlog grew last quarter but orders slowed in the month of June and our backlog coverage for September is lower than normal. As a result of this increased uncertainty, we currently estimate that our revenue in the third quarter will be about even with last quarter and below our seasonal average growth rate. If customer demand increases as the quarter progresses, we are ready to support higher shipments with short product lead times, a strong inventory position and available manufacturing capacity. In the meantime, we remain focused on strengthening our market positions in Analog and Embedded Processing. These areas are complementary and benefit from TI’s extensive and expanding relationships with customers around the world. As we continue to broaden our portfolio of leadership products, especially our standard catalog products, we enhance our ability to serve these customers.”

Key Stats:

Last quarter marked the fifth straight quarter that the company saw shrinking gross margins, as gross margin fell 1.2 percentage points to 49.5% from the year-earlier quarter. Over that time, margins have contracted on average 3.7 percentage points per quarter on a year-over-year basis.

Revenue has dropped for four quarters in a row. Revenue declined 8% to $3.12 billion in the first quarter. The figure fell 3% in the fourth quarter of the last fiscal year from the year earlier and dropped 7.3% in the third quarter of the last fiscal year from the year-ago quarter.

The company fell short of forecasts after beating estimates in the previous two quarters. In the first quarter, it topped the mark by 3 cents, and in the fourth quarter of the last fiscal year, it was ahead by 2 cents.

Net income has dropped 41% year-over-year on average across the last five quarters. Performance was hurt by a 68.4% decline in the fourth quarter of the last fiscal year from the year-earlier quarter.

Looking Forward: Analysts appear increasingly negative about the company’s results for the next quarter. The average estimate for the third quarter has moved down from 52 cents a share to 48 cents over the last ninety days. Over the past sixty days, the average estimate for the fiscal year has reached $1.74 per share, a decline from $1.80.

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(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

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