Texas Instruments’ 4Q Sales Top Estimates; Street Says Hold

Texas Instruments’ (TI) fourth-quarter sales rose 22% to $4.1 billion year-on-year, and exceeded analysts’ estimates of $3.6 billion. The revenue increase was driven by strong demand for the company’s semiconductors and ICs (integrated circuits) in personal electronics, automotive and industrial markets.

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The IC maker’s analog business segment, which manufactures analog semiconductors, generated sales of $3.1 billion in 4Q20, a rise of 25% year-on-year. The company’s processing segment, which produces embedded processors like microcontrollers, had revenues of $720 million, a growth of 14% year-on-year.

Texas Instruments’ (TXN) CEO Rich Templeton commented, “Our cash flow from operations of $6.1 billion for the year again underscored the strength of our business model. Free cash flow for the year was $5.5 billion and 38% of revenue. This reflects the quality of our product portfolio, as well as the efficiency of our manufacturing strategy, including the benefit of 300-millimeter Analog production.”

“TI’s first quarter outlook is for revenue in the range of $3.79 billion to $4.11 billion and earnings per share between $1.44 and $1.66. We continue to expect our 2021 annual operating tax rate to be about 14%,” Templeton added. (See TXN analysis on TipRanks)

Mizuho Securities analyst Vijay Rakesh reiterated a Hold rating on the stock on Jan. 26 and set a price target of $175. Rakesh commented on the results, “TXN, the #1 global analog supplier, reported a BIG DecQ ~$4.1B top line (consensus $3.6B) driven by Auto up 25% y/y and industrial up 16% y/y BUT Comm down 28% q/q and 8% y/y, potentially with Huawei headwinds. TXN also guided to a BIG MarQ $4.0B (consensus $3.6B) – we believe with continued Auto-industrial strength – positive for the peer supply chain with ON, NXPI, ALGM and MCHP.”

Wall Street analysts are sidelined on the stock and the consensus is a Hold with 6 analysts recommending a Hold, 3 analysts suggesting a Sell, and 4 analysts say Buy. The average price target of $177.58 implies 3.6% upside potential to current levels. Shares are up by 6.1% over the past month.