The yearly results for Texas Instruments Incorporated (NASDAQ:TXN) were released last week, making it a good time to revisit its performance. The result was positive overall – although revenues of US$14b were in line with what analysts predicted, Texas Instruments surprised by delivering a statutory profit of US$5.24 per share, modestly greater than expected. Following the result, analysts have updated their earnings model, and it would be good to know whether they think there’s been a strong change in the company’s prospects, or if it’s business as usual. Readers will be glad to know we’ve aggregated the latest statutory forecasts to see whether analysts have changed their mind on Texas Instruments after the latest results.
Following last week’s earnings report, Texas Instruments’s 29 analysts are forecasting 2020 revenues to be US$14.3b, approximately in line with the last 12 months. Statutory earnings per share are expected to shrink 4.4% to US$5.13 in the same period. Yet prior to the latest earnings, analysts had been forecasting revenues of US$14.1b and earnings per share (EPS) of US$5.03 in 2020. The consensus analysts don’t seem to have seen anything in these results that would have changed their view on the business, given there’s been no major change to their estimates.
With analysts reconfirming their revenue and earnings forecasts, it’s surprising to see that the price target rose 6.3% to US$136. It looks as though analysts previously had some doubts over whether the business would live up to their expectations. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company’s valuation. There are some variant perceptions on Texas Instruments, with the most bullish analyst valuing it at US$164 and the most bearish at US$115 per share. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
Zooming out to look at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up both against past performance, and against industry growth estimates. These estimates imply that sales are expected to slow, with a forecast revenue decline of 0.4% a significant reduction from annual growth of 4.2% over the last five years. Compare this with our data, which suggests that other companies in the same market are, in aggregate, expected to see their revenue grow 8.2% next year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining – analysts also expect Texas Instruments to grow slower than the wider market.
The Bottom Line
The most important thing to take away is that there’s been no major change in sentiment, with analysts reconfirming that earnings per share are expected to continue performing in line with their prior expectations. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations – although our data does suggest that Texas Instruments’s revenues are expected to perform worse than the wider market. There was also a nice increase in the price target, with analysts feeling that the intrinsic value of the business is improving.
With that in mind, we wouldn’t be too quick to come to a conclusion on Texas Instruments. Long-term earnings power is much more important than next year’s profits. We have estimates – from multiple Texas Instruments analysts – going out to 2022, and you can see them free on our platform here.
It might also be worth considering whether Texas Instruments’s debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.