Texas Instruments: EPS Beats

Core Insights - Texas Instruments reported fourth-quarter earnings that exceeded expectations, with an EPS of $1.30 against an estimate of $1.21 and revenue of $4.01 billion compared to expectations of $3.88 billion [1][2][3] - Despite surpassing projections, the company experienced a year-over-year revenue decline of 1.7%, indicating a challenging quarter [2][3] Financial Performance - The fourth-quarter metrics included a 12.8% decrease in EPS from $1.49 in Q4 2023 to $1.30 in Q4 2024 [3] - Revenue fell from $4.08 billion in Q4 2023 to $4.01 billion in Q4 2024, marking a 1.7% decline [3] - Operating profit decreased by 10.2% year-over-year, from $1.53 billion to $1.38 billion [3] - Net income also saw a decline of 12.1%, dropping from $1.37 billion to $1.21 billion [3] - Free cash flow significantly decreased by 40.3%, from $1.35 billion to $806 million [3] Business Overview - Texas Instruments primarily generates revenue from two segments: Analog and Embedded Processing, with the Analog segment contributing 77% of full-year revenue in 2024 [4] - The company utilizes a 300mm wafer fabrication process, reducing production costs by approximately 40% compared to older technologies [4] - TI has focused on capital allocation to ensure steady free cash flow, investing in R&D and expanding manufacturing capacity [5] Segment Performance - The Embedded Processing segment faced a significant revenue decline of 18%, down to $613 million, while the Analog segment experienced modest growth of 2% [6] - Revenue from the "Other" category grew by 7%, indicating resilience in certain areas [6] Operational Challenges - Texas Instruments reported increased inventory levels of $4.5 billion, equating to 244 days of inventory, up from 225 days in the previous year [7] - The company noted solid demand in China for automotive electronics, suggesting pockets of market strength despite operational challenges [7] Shareholder Returns - Over the past year, Texas Instruments distributed $5.7 billion through dividends and share buybacks, with dividends increasing by 5%, marking the 21st consecutive year of rises [8] - The company’s capital allocation strategy reflects its commitment to maintaining a competitive position in the semiconductor industry [9] Future Outlook - For the first quarter of 2025, Texas Instruments anticipates revenue between $3.74 billion and $4.06 billion, with EPS expected to range from $0.94 to $1.16 [11] - Management projects an effective tax rate around 12%, indicating an understanding of current market conditions and anticipated short-term challenges [11]