CS First Boston Raises Estimates for Texas Instruments

Analyst Michael Masdea sees operating leverage potential ahead

Texas Instruments (TXN ) posted second-quarter earnings per share of 38 cents, vs. 25 cents. CS First Boston raised its estimates and target price.

Analyst Michael Masdea says $3.24 billion in second-quarter revenue and 32 cents EPS was better than his $3.17 billion and 28 cents estimates. He says strong demand from wireless and a rebound in high-performance analog drove the upside.

Masdea notes better than expected gross margin was due to a better mix, utilization, and cost controls. He says guidance for $3.29 billion to $3.56 billion in third-quarter revenue is well above his and consensus estimates; 31 cents to 35 cents EPS guidance is also better than his 32 cents and consensus 28 cents forecasts.

He sees operating leverage potential ahead. He raised his EPS estimates from $1.08 for 2005 to $1.31, and $1.22 for 2006 to $1.40. He lifted his $30 target to $38. He rates the stock as outperform.

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