Summary
- Texas Instruments posted solid Q3 earnings, beating both revenue and EPS estimates.
- Texas Instruments pays a safe, strong dividend that has been increased for 17 years straight and counting.
- Texas Instruments is approaching some crucial technical levels that should be leaned on as support and will signal the buying opportunity.
In this current market, we continue to see strong companies that are producing strong earnings in extremely challenging times sell-off. I am looking to capitalize on these sell-offs. Texas Instruments (TXN) reported earnings on Tuesday evening, and the stock has sold off about 3% since. Earnings beat on both revenue and EPS and the future remains bright, but yet the stock gaps down. Texas Instruments also offers a great dividend to collect while you wait for the stock to rebound. I could see the stock sliding a little further to some key technical levels, but I am bullish long term on the stock.
(Source: Google)
How Were The Earnings?
On Tuesday night, Texas Instruments reported Q3. Some of the highlights included:
(All data from is from the earnings call)
- GAAP EPS of $1.45. This was a beat of $0.17.
- Revenue hit $3.82 billion. This was a beat of $370 million, and 1.3% YoY growth.
- Gross margin came in low at 64.3% vs. consensus of 64.6%.
The company saw revenue grew 18% from Q2 driven by a nice rebound in the automotive sector. This helped drive not only a beat but year-over-year growth with is always encouraging to see in times like these. Looking at the segments within the company, the hardest hit segment at -19% was the "other" segment. This can be tied to a lack of back-to-school sales when it comes to calculators, which is due to COVID-19. Analog and Embedded Processing grew 18% and 19% respectively in the quarter.
Why didn't the stock move on this news? Well, it would appear some of the information was priced in. I do think the lower than expected margin is what did it though. Especially as the company talked about growing capacity, which one would think would increase margin. We did see operating margins increase to 42.2% vs. consensus of 40%, so this may just be a short term bump in the road. We will have to wait to see what future margin reports look like to get a better idea of this.
All in all, you have to be pretty happy with these numbers given the scenario. The stock is up over 55% off the March lows, a little consolidation would be healthy at this point. I am looking to buy the stock as it falls back to test some key technical levels.
