Earnings Report Brightens Outlook
Texas Instruments Incorporated (NASDAQ:TXN) may increase its dividend payout in September or October after the chipmaker announced better-than-expected earnings, according to an analyst at Bank of America Merrill Lynch.
The shares of Texas Instruments stock surged eight percent in today’s trading, hitting a 16-year high at $71.42 after the upgrade.
The stock surged after analyst Vivek Arya raised his rating on the stock to “Buy,” raising his stock price target to $80.00 from $64.00. Arya wrote in a note to clients that the “strong” results and outlook address his near-term concerns over the impact of Brexit and other macro-issues on the company’s auto and industrial businesses. He said the next potential catalyst could be a dividend boost in September or October. (Source: “Texas Instruments’ stock jumps to 16-year high after results prompt analyst upgrade,” MarketWatch, July 26, 2016.)
On July 25 Texas Instruments said that demand in the automotive, industrial, and communications sectors helped the chipmaker post revenue and profit in the upper range of its estimates and issue strong guidance for the current quarter.
For the current quarter, Texas Instruments sees revenue in the range of $3.3 billion to $3.6 billion with earnings on a per-share basis between $0.81 and $0.91. Analysts surveyed by Thomson Reuters expect earnings of $0.81 a share on revenue of $3.4 billion.
“Compared with a year ago, demand for our products continued to be strong in the automotive market, and grew in the industrial and communications equipment markets,” said Rich Templeton, chief executive of the company. “Despite sequential growth, demand in the personal electronics market was down from a year ago.”
The Dallas-based company is among suppliers for Apple Inc. Texas Instruments, which makes chips used in everything from cell phones to industrial equipment, has focused on analog chips, which have a high-profit margin, and embedded processors, the “brains” of many electronic devices from electric toothbrushes to driver-assistance systems in autos.
Analysts for RBC Capital Markets believe headwinds could pick up in the second half of the year. Among other reasons, the analysts see possible weakness in auto and industrial markets, which have so far boosted the company’s results.
“Over the past five to 10 years, acceleration in electronic content in the auto and industrial end markets has maintained analog semiconductor unit growth,” the RBC analysts said in a research note on Friday. “A slowdown or pause in the growth rates of semiconductor content in these end markets could reduce top-line growth at analog companies.” (Source: Ibid.)