Texas Instruments (TXN) should benefit from the boom in wireless phones around the world, but growth is likely dampened by shrinking margins, competition, and its partial reliance on a weakening sector of computing, traditional computer hardware such as printers and monitors. Cheaper output from Asian manufacturers also is taking a toll, TI management recently told investors.
Texas Instruments designs and makes semiconductors that it sells to electronics designers and manufacturers all over the world. Headquartered in Dallas, TI has design, manufacturing or sales operations in more than 35 countries.
The company has four segments: analog, embedded processing, wireless and other.
“We expect Analog and Embedded Processing to be our primary growth engines in the years ahead, and we therefore focus our resources on these segments,” management said in a recent filing.
“We were the world’s fourth-largest semiconductor company in 2011 as measured by revenue, according to preliminary estimates from an external source. Additionally, we sell calculators and related products.”
Texas Instruments has a market cap of $32.13 billion in a sector, semiconductors, where the average company size is $7.85 billion. Its trailing 12-month P/E ratio is 20.76 and its five-year projected price-to-earnings-growth (PEG) ratio is 2.60, compared to 2 for the sector.
Its projected earnings per share growth for the coming year is 27.22 percent, compared to a sector average of 30.75 percent.
High debt
Analysts are generally positive on TXN, with buy or outperform calls from Caris & Company, Jefferies, Oppenheimer & Company, RBC Capital Markets, Raymond James, Smith Barney, and Stifel Nicolaus.
FBR and Zacks Investment Research rate the stock at underperform.
“June quarter earnings exceeded the Zacks Consensus, although guidance was disappointing due to increased caution at distributors and reduced visibility. Therefore, the company’s compelling product line, market share gains and strategic refocus notwithstanding, we think the shares deserve a lower multiple because of the uncertainty in demand and TI’s significant capacity that will pressure earnings,” Zacks analysts wrote in late July.
“The debt level also appears high, increasing the risk profile.”
Texas Instruments next reports on Oct. 22.
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