Texas Instruments Forecasts Profit That Trails Estimates
Texas Instruments Inc. (TXN), the largest analog-chip maker, forecast sales and profit that may fall short of analysts’ estimates as some customers cut orders ahead of an anticipated slowdown in demand for their products.
Fourth-quarter profit will be 42 cents to 50 cents a share on revenue of $2.86 billion to $3.1 billion, the Dallas-based company said yesterday in a statement. That compares with average analyst estimates of 51 cents and $3.11 billion, according to data compiled by Bloomberg.
Chief Executive Officer Rich Templeton is completing a shift to analog and embedded-processing markets and moving away from modems in mobile phones, an industry now led by Qualcomm Inc. (QCOM) While that diversification has shielded Texas Instruments from a slump in any single area, such as personal computers, other markets may be beginning to slow.
“Even those areas like industrial and infrastructure that have been relative stalwarts are feeling a bit fatigued,” said Cody Acree, an analyst at Williams Financial Group in Dallas who recommends buying the stock. “They are on the margin a bit more cautious than would be seasonally normal.”
Texas Instruments fell 2.4 percent to $39.99 at 9:52 a.m. in New York. The stock had gained 33 percent this year through yesterday.
The forecast reflects the typical decline in fourth-quarter demand from auto makers and industrial companies, Chief Financial Officer Kevin March said in an interview. Orders aren’t being canceled at a higher rate than usual, he said.
“The signals are suggesting that this is a normal demand environment,” March said.
Third-quarter profit fell 20 percent to $629 million, or 56 cents a share, from $784 million, or 67 cents, in the same period a year earlier. Sales fell 4.3 percent to $3.24 billion. On average, analysts had estimated profit of 53 cents on revenue of $3.23 billion, according to data compiled by Bloomberg.
Gross margin, or the percentage of sales remaining after deducting costs of production, rose to a record 54.8 percent, topping the 53.9 percent average analyst estimate.
Texas Instruments’ semiconductors are used in almost every type of electronic device that needs a chip, from military munitions and blood pressure monitors to industrial air conditioners. The company’s scope makes its earnings an indicator of demand across the economy.
Texas Instruments started exiting the business of digital baseband processors used in mobile phones more than a year ago and sales will fall to about $50 million in the fourth quarter, the company said. Qualcomm now dominates that market.
While the shift to analog has eased the company’s dependence on the mobile-device market, Texas Instruments still supplies cheaper components such as power-regulation chips and audio processors for phones. Its products are also used as power regulators in PCs.
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