Texas Instruments Rises on Forecast for Revival in Orders

Texas Instruments Inc. (TXN), the largest maker of analog semiconductors, rose after forecasting second- quarter earnings that may top some analysts’ estimates, buoyed by a revival in chip orders.

Texas Instruments increased 1.1 percent to $32.25 at 9:45 a.m. New York time following the report yesterday after the markets closed. The stock earlier advanced 2.7 percent for the biggest intraday gain in a month. Shares of the Dallas-based company had climbed 9.6 percent this year before today.

Texas Instruments’ analog chips perform electronic functions that range from running car radios to controlling missiles, making the company’s earnings a harbinger of demand in the broader economy. The chipmaker’s orders are increasing across most of its end markets, according to Tore Svanberg, an analyst at Stifel Nicolaus & Co.

“The improvement the company is seeing is fairly broad- based,” said San Francisco-based Svanberg. He recommends buying Texas Instruments stock and owns some of the shares. “Automotive is clearly standing out as an area of strength.”

Profit will be 30 cents to 38 cents a share on revenue of $3.22 billion to $3.48 billion, the company said yesterday in a statement. Analysts on average had predicted earnings of 32 cents on sales of $3.28 billion, according to data compiled by Bloomberg.

‘Breadth’ of Orders

“Our business cycle bottomed in the first quarter, and early signs of growth began to emerge,” Texas Instruments Chief Executive Officer Rich Templeton said in the statement. “Particularly encouraging is the breadth of increased orders across geographical regions and markets, including the industrial sector.”

Texas Instruments’ forecast underscores increasing signs that the U.S. economy is beginning to strengthen, lifted by household spending on durable goods like automobiles. Homebuilding and auto purchases are accounting for a growing proportion of gains in gross domestic product growth, according to Joseph Carson, director of global economic research at AllianceBernstein LP.

First-quarter net income declined 60 percent to $265 million, or 22 cents a share, from $666 million, or 55 cents, in the same period a year earlier, the company said. Sales fell 8 percent to $3.12 billion. Analysts had estimated earnings of 17 cents on sales of $3.06 billion.

Last month, Vice President Ron Slaymaker said Texas Instruments was seeing weaker-than-expected demand for its connectivity products and OMAP, or Open Multimedia Application Platform, processors, which run programs in smartphones and tablets. Some clients were reducing their projections for demand for the devices and cutting inventory, he said on a conference call on March 8.

Now, customers have stopped drawing down inventory, and some may have brought levels lower than appropriate for demand, Chief Financial Officer Kevin March said in an interview yesterday. The return of order growth across regions and business segments indicates that the industry may be poised for multiple quarters of growth, he said.

“The fact that it was broad-based is much more reassuring,” March said. “It’s not like one market has one great product offering.”

To contact the reporter on this story: Ian King in San Francisco at ianking@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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TEXAS INSTRUMENTS EARNS

Jason Janik/Bloomberg

A worker loads a silicon wafer machine in a clean room at the Texas Instruments semiconductor fabrication plant in Dallas.

A worker loads a silicon wafer machine in a clean room at the Texas Instruments semiconductor fabrication plant in Dallas. Photographer: Jason Janik/Bloomberg