Summary
- Texas Instruments boasts of a broad portfolio and superior execution capabilities.
- The company has one of the best dividend yields in the technology sector.
- Investors should remain aware of risks such as impact of recession and inventory buildup by end customers.
In the recently released second-quarter earnings, semiconductor player, Texas Instruments (NASDAQ:TXN), has surpassed both revenue and earnings consensus estimates by a wide margin. Earnings surprise is not that big a surprise for Texas Instruments' investors. In fact, the company has managed to outperform consensus earnings estimates in eleven quarters and revenue estimates in nine quarters in the past three years. Since the first quarter of 2018, the company has never missed earnings estimates.
If you are looking for disruptive technology and the next hot thing in the semiconductor market, Texas Instruments is definitely not your taste. Instead, Texas Instruments is for those who want a consistent growth and strong dividend yield at a relatively lower risk level. And achieving these goals does not seem difficult for Texas Instruments' investors, considering that this blue-chip company with a strong operational history of 90 years sports a broad portfolio of superior products used across a range of industries.
Texas Instruments has come out with strong third-quarter guidance despite the challenging macroeconomic environment
In the second quarter, Texas Instruments' revenues dropped 11.70% YoY to $3.24 billion but remained ahead of the consensus by $287.42 million. Non-GAAP EPS of $1.57 was also ahead of the consensus by $0.65.
Although the company remains cautious about potential inventory building by some customers, Texas Instruments has provided a strong outlook for the third quarter. The company expects revenues to be in the range of $3.26 billion to $3.54 billion and non-GAAP EPS to be in the range of $1.14 to $1.34.
Although the pandemic has wreaked widespread havoc, certain industries have started recovering faster than others. Texas Instruments' analog processing business has managed to fare better than previously anticipated, driven by demand in areas such as personal electronics, communications equipment, and enterprise systems.
In 2019, Texas Instruments accounted for almost 19% of the global analog processing market share. The company's analog chips have been mainly targeting end markets such as industrial, automotive, and personal electronics. The longer-than-expected tenure of the pandemic and the subsequent increasing demands from the work-from-home economy has played a pivotal role in the strength of the company's analog business. Also, the longer the pandemic persists, the more persistent will be the changes in consumer behavior. Hence, it is safe to say that the work-from-home trend and the related digitization initiatives will continue to have an impact even on the post-COVID-19 world. The dramatic adoption of digitization will now be a permanent feature of the global economy. This will continue to drive demand in the semiconductor industry.
