Texas Instruments (TXN) Drops on Weak Guidance, Analysts See More Downside

Texas Instruments (NASDAQ: TXN) reported better-than-expected Q3 results, although the soft outlook pushed shares about 5% lower in pre-market Wednesday trading.

Texas Instruments posted an EPS of $2.45 on revenue of $5.24 billion. This is better than the consensus that called for EPS of $2.39 on revenue of $5.14 billion.

TXN said it "experienced expected weakness in personal electronics and expanding weakness across industrial." Analog revenue increased 13% to $3.99 billion, again better than the $3.95 billion estimate.

"This reflects the quality of our product portfolio, as well as the efficiency of our manufacturing strategy, including the benefit of 300-mm production."

For this quarter, the company sees EPS and revenue at $1.97 and $4.6 billion, respectively, at the midpoint of the guidance. Analysts were looking for an EPS of $2.24 on revenue of $4.95 billion.

UBS analyst Timothy Arcuri reiterated a Neutral rating as weakness is spreading across TXN’s business. He continues to see a ”mixed stock setup.”

“We would wait to see some of this play out further before turning more constructive. The capital management call in early 2023 could prove to be a catalyst as TXN will outline the offsets against capex/depreciation that it will get from the ITC and CHIPS Act, programs that in aggregate could cushion its capex by ~20% or potentially more,” Arcuri said.

Citi analyst Christopher Danely lowered the price target to $155 from $165 per share on the Neutral-rated TXN shares. The lowered price target reflects below-consensus estimates.

“We expect Consensus estimates to decline towards our $7.72 C23 EPS estimate,” Danely added.

Goldman Sachs analyst Toshiya Hari reiterated a Sell rating and cut the price target to $153 from $160 per share to reflect below-consensus 2023 EPS estimates.

“While tailwinds from the CHIPS Act will serve as a partial offset starting in 1Q23, we expect cyclical demand headwinds, rising depreciation, and a catch-up in opex to drive a yoy decline in 2023 EPS that exceeds many of its peers in the analog and MCU space.”

By Senad Karaahmetovic

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