Texas Instruments Q3 Earnings Beat: Can Strong Results Lift the Stock?

Core Insights - Texas Instruments (TXN) reported Q3 2024 earnings of $1.47 per share, exceeding the Zacks Consensus Estimate by 8.1% and falling within the guided range of $1.24-$1.48 per share, although this represents a 20.5% decline year over year [1] - Revenues for TXN reached $4.15 billion, surpassing the Zacks Consensus Estimate by 1% and aligning with management's guidance of $3.94-$4.26 billion, marking an 8.4% year-over-year decrease but an 8.6% sequential increase [1] - The Personal Electronics market grew approximately 30%, Enterprise Systems increased around 20%, and Communication Equipment rose about 25%, while the automotive market saw high single-digit growth, driven by strength in the Chinese market [1] Segment Performance - The Analog segment generated revenues of $3.22 billion, accounting for 77.6% of total revenues, down 4% year over year but above the Zacks Consensus Estimate of $3.08 billion [3] - Embedded Processing revenues were $653 million, representing 15.7% of total revenues, down 26.6% year over year and missing the Zacks Consensus Estimate of $724 million [3] - Other segment revenues totaled $275 million, or 6.6% of total revenues, down 4.7% from the prior year and below the consensus mark of $288.3 million [3] Operating Metrics - TXN's gross margin was 59.6%, a contraction of 251 basis points from the previous year [4] - Selling, general and administrative expenses were $428 million, down 34 basis points year over year [4] - Research and development expenses increased to $492 million, expanding 146 basis points as a percentage of revenues [4] - The operating margin was 37.44%, down 431 basis points from the prior year [4] Financial Position - As of September 30, 2024, TXN had cash and short-term investments of $8.75 billion, down from $9.7 billion as of June 30, 2024 [5] - Long-term debt remained stable at $12.84 billion, with current debt at $1.05 billion [5] - Cash generated from operations was $1.7 billion, an increase from $1.57 billion in the previous quarter [5] - Capital expenditures were $1.3 billion, with free cash flow reported at $416 million [5] - TXN paid dividends totaling $1.19 billion and repurchased shares worth $318 million during the quarter [5] Future Guidance - For Q4 2024, TXN expects revenues between $3.70 billion and $4 billion, with the Zacks Consensus Estimate at $4.11 billion, indicating a 0.83% increase year over year [5] - Earnings per share guidance is set between $1.07 and $1.29, with the consensus at $1.36, reflecting an 8.7% decline from the previous year [6] - The effective tax rate is anticipated to be approximately 13% [6] Market Context - TXN's stock has gained 13.8% year to date, underperforming the Zacks Semiconductor – General industry, which has surged 134.8% during the same period [2]