Texas Instruments (TXN – Free Report) reported earnings of $2.47 per share in the third quarter of 2022. The figure was within the management-guided range of $2.23 to $2.51. Additionally, the figure was up 19% year-on-year and 0.8% from the prior quarter level.
The net result includes a 2-cent advantage, excluding which the figure comes to $2.45, beating Zacks’ consensus estimate of 3.4%.
TXN reported revenue of $5.24 billion, up 13% from the year-ago quarter level and 1% sequentially. Revenue was near the upper end of the management-guided range of $4.9 billion to $5.3 billion. Additionally, revenue topped Zacks’ consensus estimate of $5.11 billion.
Year-on-year revenue growth was driven by strong performance in Analog, Embedded Processing and Others.
Sequential growth in the automotive, communications equipment and business systems markets remained positive.
However, weakness in the personal electronics and industrial end markets was a concern.
Shares of Texas Instruments are down 18.3% year-to-date, versus a 48.2% drop in the sector.
TXN shares fell 5.1% in after-hours trading, largely due to a weaker-than-expected outlook for fourth-quarter revenue and earnings. Additionally, the outlook shows signs of deteriorating chip demand across various sectors.
Nonetheless, Texas Instruments’ effective manufacturing strategies and continued returns for its shareholders are likely to inspire investor optimism about the stock. Its substantial investments in growth paths and its competitive advantages are other assets.
Segments in detail
Analog: Revenue of $3.99 billion was generated by the segment (76.2% of total revenue), up 13% from the year-ago quarter level.
Integrated processing: Revenue totaled $821 million (15.7% of total revenue), up 11% year-over-year.
Other: Revenues totaled $427 million (8.1% of total revenues). The figure was up 20% from the level in the prior year quarter.
Operation details
Texas Instruments’ gross margin of 69% increased 110 basis points (bps) from the year-ago quarter level.
As a percentage of revenue, selling, general and administrative expenses contracted 70 basis points year-over-year to $431 million in the current quarter.
Research and development expenses of $431 million were down 20 basis points from the year-ago quarter level as a percentage of revenue.
The operating margin was 51.1%, an increase of 150 basis points compared to the figure for the quarter of the previous year.
Balance sheet and cash flow
As of September 30, 2022, the cash and short-term investments balance was $9.1 billion, compared to $8.4 billion as of June 30, 2022.
At the end of the current quarter, TXN had long-term debt of $7.4 billion, down from $6.7 billion in the prior quarter.
Current debt was $499 million in Q3 2022, flat sequentially.
Texas Instruments generated $2.8 billion in cash from operations, compared to $1.8 billion in the prior quarter.
Capex was $790 million in the reported quarter. Free cash flow was $1.98 billion.
Texas Instruments paid dividends worth $1.05 billion in the quarter under review. TXN repurchased shares worth $996 million.
Tips
For the fourth quarter of 2022, Texas Instruments expects revenue of between $4.4 billion and $4.8 billion. The midpoint of this range is below the Zacks consensus estimate of $4.82 billion.
Texas Instruments expects earnings between $1.83 and $2.11 per share. Zacks consensus estimate for the same is pegged at $2.15 per share.
Zacks Ranking and Stocks to Consider
Currently, Texas Instruments carries a Zacks Rank #3 (Hold).
Investors interested in the broader Zacks Computer & Technology sector may consider some higher-ranked stocks like Asure Software (ASUR – free report), Aspen Technology (AZPN – free report) and Amdocs (DOX – Free Report), each carrying a Zacks Rank #2 (Buy) at present. You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Asure Software has lost 14% since the start of the year. ASUR’s long-term earnings growth rate is currently projected at 32.8%.
Aspen Technology has returned 62.4% year-to-date. AZPN’s long-term earnings growth rate is currently projected at 18.2%.
Amdocs has gained 8.9% since the start of the year. The long-term earnings growth rate for DOX is currently projected at 11.5%.
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