Texas Instruments Incorporated
TI is a very strong and well-diversified semiconductor manufacturer. They are very well managed. They have an outstanding track record of execution and growth. During the 2008-2009 recession, they made very smart acquisitions of equipment and facilities for distressed prices and they continue to benefit from those moves which still afford them opportunities for solid profitable growth.
Ests 3Q18 4Q18 FY18 FY19
Revs 4.3b 4.0 16.1 16.
EPS 1.53 1.38 5.66 6.11
P=100.25, TTM EPS 5.01, divs=3.08, yield=3.1%, net cash neutral, solid WC surplus, TTM P/E=19X, FY19 P/E=16X
Exited position Oct 24, 2018. Great company and management but still at a premium valuation, the entire sector could be at risk if they do not deliver differentiated performance, for the time being I’m reducing my exposure through TXN, will revisit other names as they report. I will definitely look to buying back TXN once there’s visibility in where their business stabilizes and returns to growth as they are a top quality company.
3Q18 1.58 vs 1.26, +25%, est 1.53 up from 1.48
Oct 23, 2018, P=100.25, TTM EPS=5.33, P/E=19X, FY19 P/E=16X
Revs +4% to 4.26bn, Analog +8%, Embedded Processing -4%, OpInc +8%
Mgmt called out slowing demand across most markets, now limited visibility in how long or deep this could be.
Analog communications equipment grew double digit due to 5G, Industrial slowed to HSD, automotive grew double-digit but slowed from prior quarters
4Q Guidance: Revs 3.6-3.9bn (-4% to +4%), EPS 1.14-1.34 (+4.6-23% but benefit from tax cut)
I think part of the issue is due to the recent environment of strong growth we have had with various supply constraints and now that those constraints are easing, customers don’t need to build inventory buffers and can possibly work them down, clearly the question is how sustainable these levels are but there’s most likely at least a pause in growth, balancing factor is TXN is an exceptional company, will continue to invest in 300mm capacity
While valuation has contracted, so have many other names and TXN remains at a premium valuation to comps.
2Q18 1.40 vs 1.03, +36%, incl .03 tax benefit, est 1.32 up from 1.23
July 24, 2018
Revs +9% to 4.02bn, Analog +12%, Embedded +9%
GM 65.1% vs 64.3%, OM 42.6% vs 40.1%, OpInc +16%
3Q Guidance: Revs 4.11-4.45bn, EPS 1.41-1.63 (+12-29%, est 1.48) incl 10m tax benefit.
Solid results from a fantastic company, industrial and automotive remains strong, lead times and inventories remain stable.
Mid Quarter Update
July 17, 2018
CEO (in position for under 2 months) resigned due to personal behaviour that violated company’s code of conduct, former CEO back in the saddle.
Also reported Revs +9% to 4.02bn, EPS 1.37 excluding .03 tax benefits not included in guidance
1Q18 1.24 vs .97, w 20% TR instead of 12%, est 1.11 up from 1.06
Revs +11% to 3.79bn at top end of guidance, Analog +14%, Embedded Processing +15%
GM 64.6% vs 63%, OM 41% vs 36.8%, OpInc +24%
Automotive and industrial continue to be strong.
2Q Guidance: Revs 3.78-4.1bn (+2-11%, est 3.9bn), EPS 1.19-1.39 incl 10m tax benefit, est 1.23
Now expect 20% tax rate in 2018 (previously 23%) and 16% in 2019 (previously 18%)
Solid results, p/e multiple has come down to more reasonable levels, some investors have been worried about the peak of a cycle, double ordering but these results and guidance might help assuage those fears.
Mgmt feels their inventory position is solid and to provide high level of service, feel customers’ inventories are in good shape and do not see double ordering but point out they don’t see it ahead of time, also not seeing unusual activity like expediting orders, feel visibility is good.
4Q17 1.09 vs .88 ex charges/benefits, est 1.09 up from 1.01, FY17 4.37
Revs +10% to 3.75bn, Analog +11%, Embedded processing +20%
GM 65.1% vs 62.6%, OM 41.7% vs 39.0%, OpInc +17%
Automotive and industrial still strong, communications declined. FY17 Industrial and automotive were 54% of revs vs 42%, 300mm utilization ~50% still
1Q Guidance: Revs 3.49-3.79bn, EPS 1.01-1.17, est 1.06
Results are fine, stock weak after hours but the stock has been very strong, not exactly cheap at 27X trailing earnings but the quality of the company and its growth opportunity continue to justify owning the stock although valuation gap with ADI justifies owning ADI (as per my recent purchase). Expects 18% tax rate starting in 2019 down from 31% in FY17, FY18 23% due to non-cash impacts.
3Q17 1.26 vs .98 incl.04 tax benefit, TR 28%, est 1.12 up from 1.05
Revs +12% to 4.12bn, Analog +16%, Embedded Processing +17%
GM 64.5% vs 62.1%, OM 43.4% vs 38.3%, OpInc +27%
Increased dividend 24% (over last 5 years, has increased 24% p.a.) And since the end of 2004, they have retired 43% of shares outstanding!
Still roughly 25% of their 300mm footprint is utilized, plenty of opportunity to fill that with growth and at significant cost advantages.
4Q Guidance: Revs 3.57-3.87bn (+4.7-13.5%, est 3.66), EPS 1.01-1.15 (+16-32%, est 1.01) incl 20m tax benefit, demand remains solid.
2Q 171.03 vs .79, est .95
Revs +13% o 3.69bn, Analog +18%, Embedded Processing +15%
GM 64.3% vs 61.3%, OM 40% vs 34.6%, OpInc +31%
3Q Guidance: Revs 3.74-4.06bn, EPS 1.04-1.18 incl $20m tax benefit or .02/share
Management is allocating its capital to industrial and automotive markets as they believe those will be the fastest growing semiconductor markets due to increasing content.
1Q17 .89 vs .69, ex .08 unanticipated tax benefit, at top end of guidance, est .83, CY est 3.68
Revs +13% to 3.4bn, at top end of guidance, est 3.3bn, Analog +20%, Embedded processing +10%
GM 63.0% vs 60.8%, OM 36.8% vs 32.7%, reported tax rate was 20.5% vs 25%, expected 30%
Continued strength in automotive, industrial continues to strengthen
2Q Guidance: Revs 3.4-3.7bn (vs 3.27bn, est 3.5bn), EPS .89-1.01 incl 30m tax benefit or .03 per share, est .91
Solid quarter, company continues to buy back stock and pay dividends (2.4% yield). Solid balance sheet that is slightly net debt they have a solid working capital surplus but not material to their market cap.