TEXAS Instruments (TI) beat analysts’ estimates for second-quarter profit on Tuesday (Jul 23), powered by stabilising demand for analog chips from markets such as personal electronics and lower manufacturing costs.
A rebound in smartphones and personal computers sales has enabled firms to clear an inventory glut created by stockpiling during the pandemic, boosting orders for the company’s chips.
“Analog demand has bottomed and started to show some incremental growth,” said Edward Jones analyst Logan Purk.
Shares of Texas Instruments were up 3 per cent in extended trading, set to add to the about 16 per cent year-to-date gain.
“Positive reaction after-hours likely reflects in line third-quarter guide after fear of softer-than-expected analog demand following NXP’s results last night,” said Angelo Zino, senior equity analyst at CFRA Research.
Shares had closed down 3.7 per cent in regular trading following a tepid forecast from peer NXP Semiconductors.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
CEO Haviv Ilan said TI’s business grew about 20 per cent sequentially in China in the second quarter, and customers “have stopped managing their inventories over there”.
Second-quarter reported earnings of US$1.22 per share beat estimates of US$1.16, while the midpoint of its third-quarter revenue forecast of US$4.1 billion was in line with analysts’ average estimate, according to LSEG data.
Profit was also supported by increased factory loadings – the quantity of products being manufactured – which help spread out fixed costs over more output.
Chief financial officer Rafael Lizardi on a call attributed lower manufacturing unit costs to increased internal manufacturing, with greater focus on 300 millimetre wafer technology.
Activist investor Elliott Investment Management had in May urged TI to improve its free cash flow and temper its large investments in building out 300-millimetre fabs.
Elliott on Tuesday welcomed the “capital allocation initiatives announced by CEO Haviv Ilan” on the earnings call.
Capital expenditure stood at US$1.06 billion, compared to expectations of US$1.25 billion.
“Lower-than-expected capital expenditures suggest that TI is tightening its belt and responding to activist investor Elliot Management’s US$2.5 billion position in the company,” said Running Point Capital’s chief investment officer Michael Schulman.
Still, some analysts believe TI is unlikely to steer away from its capital investment strategy. REUTERS
