Last night after the close, semiconductor firm Texas Instruments (TXN 81.20, -1.16 -1.41%) reported better than expected Q1 earnings and revenues but issued soft guidance for Q2.
In Q1 specifically, TXN reported earnings per share (EPS) of $0.89, excluding a $0.08 per share tax benefit, on revenues which rose about 13.1% compared to last year to $3.4 billion. Revenues were strong due to strengthening demand from the industrial market.
The core business, Analog, reported revenues which grew 20% compared to a year ago to about $2.26 billion. Sales in Embedded were up a healthy 10% to about $803 million, while the “Other” category saw sales dip 14% to $343 million in the quarter.
Gross margins were strong, at 63.0%, reflecting product portfolio quality, as well as the efficiency of TXN’s manufacturing strategy, including the benefit of 300-millimeter Analog production.
Additionally, TXN indicated that automotive remained strong in the quarter. This seemed to contradict data points out of Maxim Integrated (MXIM 44.98, -0.14 -0.31%), a TXN peer, which suggested during its earnings conference call six days ago the signs of a weakening auto market in the US. As a result, MXIM noted expectations for their automotive business to be flat sequentially compared to a “very strong March quarter.” TXN didn’t indicate its business was heading down the same path as MXIM, perhaps reasoning for the initial strength today. Shares have since pared opening strength, down more than a point today mostly due to some soft Q2 guidance and some likely profit taking.
Again, the outlook for Q2 came in a little light. TXN’s expectations for EPS stand at $0.89-1.01 including a $30 million or about $0.03 per share tax benefit. Revenue expectations for Q2 stand at $3.4-3.7 billion, about in line with market views at this point.
Also a potential reason for the weakness today could be simply profit taking. Semis, and TXN in particular, have enjoyed healthy gains during the better part of the past 15-16 months. TXN during that timeframe is up about 72.5%, while the PHLX Semi Sector ETF (SOX 1011.71, -6.10 -0.60%) has posted gains of about 77.5% during the same period.