Texas Instruments beats Wall Street expectations despite COVID-19 impact

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Texas Instruments beats Wall Street expectations despite COVID-19 impact.
Image: Texas Instruments

Texas Instruments (TI) revealed it beat Wall Street revenue and income estimates in the first quarter despite the impact of COVID-19. In fact, the firm noted its January to March earnings got a boost from its customers’ stockpiling components. The corporation also offered second-quarter guidance that indicates it will continue to outpace market expectations.

Texas Instruments Q1 2020 Financial Results

In the period ending March 31, TI generated $3.33 billion in revenue and $1.17 billion in income, or $1.24 per share. Though the firm’s sales and profits fell by 7 percent and 4 percent year-over-year, respectively, the company outperformed analyst expectations of $3.14 billion in sales and $.99 per share.

TI’s first-quarter results also marked a sequential improvement; its net income rose by 9.34 percent, and its earnings increased by 10.71 percent from Q4 2019.

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In an earnings call, the firm’s leadership attributed its better-than-expected performance to its clients amassing semiconductors to protect against future coronavirus related supply chain disruption. Nevertheless, CEO Rich Templeton stated his firm would continue manufacturing and research operations despite the pandemic.

Last month, the corporation announced its Dallas facilities would remain open because local officials determined it to be an essential business. The chipmaker also transitioned a portion of its staff to work from home status and expanded its medical leave policy in response to COVID-19 in mid-March. With its performance nominal a month after making significant operational adjustments, it seems TI has acclimated to the new normal.

TI’s Second Quarter Outlook

For the second quarter, TI forecasts revenue of $2.16 billion to $3.19 billion against earnings of $.64 to $1.04 per share. The company explained it offered wide-ranging expectations because of “increased uncertainty” regarding customer demand. The firm also said it is using the 2008 financial crisis as the model for its Q2 outlook.

On the one hand, TI’s predictions indicate a 13 to 41 percent dip in revenue and a 23.5 to 52.9 percent income shortfall from 2019. As one of the world’s largest semiconductor manufacturers, it makes sense its financial results would mirror a larger industry downturn. But on the other hand, the company’s high-end guidance exceeds Wall Street’s expectations of $3.1 billion in sales and profits of $.93.

According to Seeking Alpha, TI has largely outperformed market analyst revenue estimates for the two years preceding Q2 2020. As such, the firm’s perspective that the industry will stumble in the second quarter but not collapse will likely be validated. Indeed, the recent positive financial results of chipmakers like ASML and Intel demonstrates the semiconductor industry’s resilience in the face of a global crisis.

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