After initially trading lower following the better than expected Q3 print and in-line Q4 guidance, shares of Texas Instruments (TXN 95.35, -1.09 -1.13%) have recovered modestly.
Beating market expectations on both the top and bottom lines in Q3, TXN reported earnings per share of $1.26 on 12% revenue growth to $4.12 billion. Gross margins were 64.5% in Q3 owing to strength in the product portfolio, as well as the efficiency of the manufacturing strategy, including the benefit of 300-millimeter Analog production.
Commenting on the quarter, management noted in the core businesses, Analog revenue grew 16% and Embedded Processing revenue grew 17% from the same quarter a year ago. Operating margin also increased in both businesses.
Further, the company continues to focus their strategy on the industrial and automotive markets, where they have been allocating their capital and driving initiatives to strengthen their position. This is based on a belief that industrial and automotive will be the fastest growing semiconductor markets due to their increasing semiconductor content, and that they provide diversity and longevity of products, which translate to a high terminal value of the portfolio.
As for guidance, TXN has a history of pitching it down the middle, and last night’s in-line Q4 outlook was no different. For the quarter, TXN expects in-line EPS of $1.01-1.05 on in-line revenues of $3.57-3.87 billion.
In a crowded semiconductor space, TXN seems to have held its place here with a solid report. The company’s place in analog and embedded seems firm and with solid gross margins to boot, what’s not to like? With that being said, the in-line guidance could be a potential “leave the door open” scenario as the company continues to give lukewarm outlooks.