Texas Instruments Cuts Q4 Revenue And Earnings Forecast

Tyler Durden's picture

At this point saying Texas Instruments guides lower is about the most habitual thing about this broken market, aside from the traditional Fed-Citadel juiced 3 pm ramp, of course. Sure enough, moments ago the analog circuits company announced results which were modestly better on the bottom and top line (following repeated earnings guidance lower), and yet which did the usual TXN thing and slashed guidance:

  • SEES 4Q REV. $2.83B-$3.07B, , EST. $3.22B
  • TI SEES 4Q EPS 23C-31C, EST. 37C

Just a tad. And, amusingly just as we predicted moments ago that in a ZIRP environment CapEx will be the first thing let go, here is TXN announcing it is slashing its full year growth spending forecast by 30%:

  • TI SEES YR CAPEX $0.5B, DOWN FROM PRIOR VIEW $0.7B

Of course who needs to invest in future revenue growth when the Fed has toner. The market, which is back to responding in absolute bizarro fashion is taking the latest disappointment in short squeeze stride, and has even managed to push the stock higher in the after hours session.

From the release:

Texas Instruments Incorporated (TI) (TXN) today announced third-quarter revenue of $3.39 billion, net income of $784 million and earnings per share of 67 cents.  EPS includes 7 cents of charges associated with the company's acquisition of National Semiconductor and restructuring that were comprehended in TI's outlook provided in September.  EPS also includes a benefit of 22 cents for changes in taxes and a Japanese pension program that were not included in the company's outlook.

"TI revenue grew sequentially and operations were well executed even though the economy and semiconductor market remained weak and likely will get weaker in the fourth quarter," said Rich Templeton, TI's chairman, president and CEO.  "Our core businesses of Analog and Embedded Processing each grew revenue by 2 percent.  Our operations were disciplined, with expenses and inventory levels both down, and our core businesses grew profit faster than revenue."

Regarding TI's business model, which is focused on Analog and Embedded Processing, Templeton said, "These two core businesses now comprise 70 percent of our revenue.  The importance of this strategy shows in the strong cash that we generate even in weak markets and in our ability to return that cash to shareholders.  In the third quarter, our free cash flow exceeded $1 billion, and we returned more than 75 percent of it through dividends and share repurchases.  Our confidence in the long-term sustainability of our business model drove the dividend increase of 24 percent that we announced in the quarter." 

Operating profit increased from a year ago as the benefit from the Japan pension program change and lower acquisition charges more than offset higher operating expenses that resulted primarily from the inclusion of a full quarter of Silicon Valley Analog.  Compared with the second quarter, operating profit was higher primarily due to the Japan pension program change, as well as higher gross profit and lower operating expenses.

3Q12 additional financial information

  •     Orders were $3.24 billion, up 6 percent from the year-ago quarter and down 5 percent from the prior quarter.
  •     Inventory was $1.85 billion at the end of the quarter, down $117 million from a year ago primarily due to the fair value write-up of inventory that was acquired from National Semiconductor.  Inventory was down $37 million from the prior quarter.
  •     Capital expenditures were $149 million in the quarter compared with $193 million a year ago and $146 million in the prior quarter.  Capital expenditures in the quarter were primarily for semiconductor manufacturing equipment.
  •     In August 2012, the company issued $1.5 billion of new long-term debt at an average coupon rate of 1.05%.  The company repaid $500 million of commercial paper borrowings in the quarter and has no remaining commercial paper obligations at the end of the quarter.
  •     The company used $600 million in the quarter to repurchase 20.6 million shares of its common stock and paid dividends of $194 million.

Outlook

For the fourth quarter of 2012, TI expects:

  • Revenue:  $2.83 – 3.07 billion
  • Earnings per share:  $0.23 – 0.31

The fourth quarter's EPS will be negatively affected by about 6 cents from acquisition and restructuring charges.   

TI will update its fourth-quarter outlook on December 10, 2012.

For the full year of 2012, TI expects approximately the following:

  •     R&D expense:  $1.9 billion
  •     Capital expenditures:  $0.5 billion, down from the prior expectation of $0.7 billion
  •     Depreciation:  $1.0 billion
  •     Annual effective tax rate:  22%, down from the prior expectation of 26%

Odd that nobody seems to have problem with corporations, which now are people, seeing their tax rates progressively go lower. Then again, TXN isn't running for president. Yet.