Texas Instruments (TXN) Information Technology - Semiconductors | Reports July 25, After Market Closes

The rebound in the semiconductor space comes amid a shift away from PCs to high growth markets such as IoT, wireless connectivity, and even automotive technology. Texas instruments is at the forefront of some of the progress made in wireless infrastructure and connected cars. And while they are best known for making calculators their bread and butter is in analog and embedded chips for mobile devices. The chipmaker is less likely to be severely impacted by declining iPhone sales due to its wide array of products. Expectations are still relatively muted heading into its Q2 results with investors skeptical about the industry’s broader turnaround.

The Estimize consensus is calling for earnings per share of 74 cents on $3.21 billion in revenue, 2 cents higher than Wall Street on the bottom line and right in line on the top. Compared to the year earlier earnings are projected positive with flat sales growth. The stock is up over 30% in the past 6 months, but don’t expect any additional jump after its report. Typically, shares remain flat for 30 days at which point it increases by 2%. 

Texas Instruments currently reports two core segments; embedded and analog chips. The analog segments works on converting real world signals into digital signal and garners about 60% of total revenue. On the other hand, embedded chips consists of microcontrollers, processors and wireless connectivity device. The company earned about 25% of its total revenue from this segment with the remainder coming from calculators, royalties and other devices. Last quarter saw sharp declines in both embedded and analog chips for a number of reasons including currency headwinds, macro volatility and a decline in iPhone sales. This quarter it wouldn’t be shocking to see the same concerns persist.

The good news is that 5G technology and potential self driving cars should support Texas Instruments future growth. Its embedded space is making progress in the automotive space providing key components to expand in the area. However, the company faces stiff competition in this space from NXP Semiconductor, Qualcomm and Intel which also produce MCUs and connectivity products. Unlike its peers Texas Instruments has maintained flat revenue growth when sales have declined for the competition.