Texas Instruments (TXN) PT Increases After Beat/Raise - Sterne Agee CRT

Sterne Agee CRT analyst, Douglas Freedman, raised his PT on Texas Instruments (NASDAQ: TXN) to $66 and believes that management's consignment strategy, continued investment in core businesses (auto + industrial), and the ongoing 300mm fab conversion should help the company navigate through the still challenging macro environment. No change to Buy rating.

Apple headwinds in 1H16 could potentially turn into tailwinds in 2H16 with the iPhone 7 launch and TXN appears well prepared given the early inventory build. Committed cash return strategy also provides attractive downside support.

MarQ results and JunQ guidance beat expectations on broad based strength and margin upside. Q1 rev/GM/EPS of $3.00B(-5.7% q/q)/60.6%/$0.65 beat consensus of $2.98B (-6.5% q/q)/58.4%/ $0.62. Consistent with commentary on last call, mobility revenue in Q1 was down $150M Y/Y, but the weakness was offset by strength in other segments. At the midpoint TXN guided Q2 revenue/EPS to $3.20B(+6.5% q/q)/$0.72, also ahead of consensus of $3.18B (+6.5% q/ q)/$0.71. Mobility weakness is expected to continue into Q2 as sales are down y/y despite some q/q growth. Q1 DOI of 139 was up materially from Q4 level of 117, management cited mobility weakness in Q1 as well as preparation for new mobile platform release in 2H (iPhone 7). Near term gross margin is likely helped by higher factory loading and the inventory build, as such we lowered our incremental GM forecast in 2H16.

For an analyst ratings summary and ratings history on Texas Instruments click here. For more ratings news on Texas Instruments click here.

Shares of Texas Instruments closed at $59.92 yesterday.

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