Texas Instruments Q3 Earnings: Can NasdaqGS:TXN Hit Its $1.29 EPS Target?

in EARNINGS/INVESTING IDEAS by

Texas Instruments Incorporated (NasdaqGS:TXN) is scheduled to report Q3 earnings results on October 20, 2020.

The company is expected to report earnings of $1.29/share on revenue of $3.445 billion. The consensus earnings per share (EPS) of $1.29/share is based on a poll of 13 analysts and represents a decline in eps of −12.7% over the same quarter last year, when the company reported earnings of $1.48/share.

The revenue forecast of $3.445 billion based on a poll of 27 analysts implies a year-over-year (YoY) decline in revenue of −8.6%. Last year the company reported $3.771 billion in revenue for the quarter.

Expected to report EPS contraction of −12.7% for Q3, 2020
Metric Expected Prior Year YoY Change
Revenue $3,445.43 $3,771.00 −8.6%
EPS $1.29 $1.48 −12.7%

Earnings Call Trends

Management has been great at managing analyst expectations historically. The company has a perfect record over the last 8 tracked quarters of exceeding earnings guidance.

What are your expectations from Texas Instruments Incorporated for earnings this quarter? Let us know in the comments!

Analyst Expected vs. Reported EPS
Quarter Expected Reported Surprise Result
Q2, 2020 $0.92 $1.57 71.1% Beat
Q1, 2020 $1.02 $1.30 27.6% Beat
Q4, 2019 $1.04 $1.17 12.8% Beat
Q3, 2019 $1.44 $1.48 2.6% Beat
Q2, 2019 $1.26 $1.33 5.3% Beat
Q1, 2019 $1.17 $1.29 10.5% Beat
Q4, 2018 $1.27 $1.33 4.4% Beat
Q3, 2018 $1.58 $1.65 4.9% Beat

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending June 30, 2020, the stock price reacted by falling −3.0%.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
July 21, 2020 $136.58 $132.53 −3.0% Decline
April 21, 2020 $111.53 $111.98 0.4% Increase
January 22, 2020 $130.86 $134.25 2.6% Increase
October 22, 2019 $130.93 $118.95 −9.1% Decline

The other question to consider is one of earnings manipulation. There is a lot of pressure on management each quarter to deliver on earnings expectations. The Beneish M-Score is a statistical model that provides some insight into whether the company might be manipulating earnings. With a Beneish M-Score of −3.01, the model suggests that the company is not likely to be an earnings manipulator. A value of −3.01 implies a 0.1% chance of earnings manipulation.

Fundamentals And Technical Analysis

Texas Instruments Incorporated is currently trading at $154.75/share, up 1.1% for the day. The company is trading at approximately 98.9% of its 52-week high of $155.88/share. The company’s stock price is up 16.8% since the last earnings report and down −0.1% over the previous week.

The company’s 14 Day Relative Price Index (RSI) of 64.43 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.


NasdaqGS:TXN Stock Price Chart
Source: Finbox

The current share price implies a price-to-earnings (P/E) multiple of 28.12 and a forward P/E multiple of 27.97.

Texas Instruments Incorporated’s current share price also implies a price-to-book (P/B) multiple of 18.47. The following table summarizes some other key fundamental ratios:

Data as of October 19, 2020
Metric Value
Last Reported Fiscal Period Key FY2020.Q2
Period End Date June 30, 2020
Stock Price (Current) $154.75
P/E Ratio 28.1x
P/E Ratio (Fwd) 28.0x
PEG Ratio −10.2
Total Debt / Total Capital 4.6%
Levered Free Cash Flow $5.714 billion
EV / EBITDA 22.7x

Finbox

Texas Instruments Incorporated is a large-cap stock with a market capitalization of $140.2 billion and a total enterprise value of $142.1 billion. The company operates in the Information Technology sector and the Semiconductors & Semiconductor Equipment industry.

Texas Instruments Incorporated designs, manufactures, and sells semiconductors to electronics designers and manufacturers worldwide. It operates in two segments, Analog and Embedded Processing. The Analog segment offers power products to manage power requirements in various levels using battery management solutions, portable components, power supply controls, point-of-load products, switches and interfaces, integrated protection devices, high-voltage products, and mobile lighting and display products. This segment also provides signal chain products that sense, condition, and measure signals to allow information to be transferred or converted for further processing and control for use in end markets, including amplifiers, data converters, interface products, motor drives, clocks, and sensing products.; and high volume products comprising integrated analog and standard products, which are primarily for sale into personal electronics, industrial, and automotive markets. The Embedded Processing segment offers connected microcontrollers, such as microcontrollers, microcontrollers with integrated wireless capabilities, and stand-alone wireless connectivity solutions that are used in electronic equipment; digital signal processors for mathematical computations; and applications processors for specific computing activity. This segment offers products for use in various markets, such as industrial, automotive, Personal electronics, communications equipment, enterprise systems, and calculators and other. The company also provides DLP products primarily for use in projectors to create high-definition images; calculators; and application-specific integrated circuits. Texas Instruments Incorporated markets and sells its semiconductor products through direct sales and distributors, as well as through its website. The company was founded in 1930 and is headquartered in Dallas, Texas.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.