Texas Instruments’ 2Q17 Earnings Boost Semiconductor Optimism

Economic Bellwether

Texas Instruments (TI), the global US tech company that designs and manufactures semiconductors, has given semiconductor stocks with ties to the automotive and industrial markets a large dose of optimism with its announcement of a strong rise in fiscal 2Q17 earnings.
Commenting on its performance and returns to shareholders, Rich Templeton, TI’s chairman, president and CEO, commented that revenue had climbed 13% from the corresponding previous quarter last year.

Also, the company’s products continue to be in strong demand in the automotive industry and went on supporting the industrial arena.
The company, which is immersed in almost all major sectors, is considered an economic doyen, hence the optimism. It designs, manufactures, and sells analog and embedded chips for the automotive, industrial, personal electronics, automotive, communication equipment, and enterprise systems markets. In fact, its chips are used in almost everything that has an on-off switch and requires power.

Given its diverse exposure across customer types and sectors and with a 100,000+ global customer base comprising enterprises, industries, infrastructure providers, and individuals, analysts use their earnings to forecast demand in most economic sectors.

Fiscal 2Q17 Results

TI reported double-digit revenue growth for two successive quarters, driven by robust demand in the industrial and automotive markets that accounted for 51 percent of its revenue. On July 25, 2017, the company also posted strong trends for fiscal 3Q17, which saw its stock rise 1.6 percent further boosting investor optimism for other analog stocks.

Giving the overall results in sum, Templeton stated that in it’s our main dealings, revenue from Analog rose 18% while that from Embedded Processing rose 15% compared to the same quarter last year. In both its Analog and Embedded Processing businesses, margins improved. A total 64.3% margin mirrored the superiority of TI’s product range, in addition to the efficacy of its industrial approach, plus the advantage of a 300-millimeter manufacture of Analog.

Templeton said the success of its industry model was further proven by the movement of cash from operations of $4.6 billion for the last 12 months. Also over the last year, the company returned $4.1 billion to owners through dividends and repurchasing stock. TI’s Q3 stance is that income will fall between $3.74 billion and $4.06 billion, while incomes per share will range between $1.04 and $1.18 — including a likely $20 million modest tax advantage.

Other Players’ Results

Given TI’s leadership in the economy, its strong earnings raised investor optimism for other analog stocks with exposure in the automotive and industrial industries. Between July 24 and 26, 2017, the stocks of Analog Devices, Inc., ON Semiconductor Corp., and Microchip Technology Inc. rose over 2 percent, however, these companies have not yet reported their 2Q17 earnings. TI’s strong earnings indicate that the above three companies may also report strong results in their upcoming earnings.

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