How Will Texas Instruments Perform In The Auto And Industrial Space In Q3?

by Trefis Team
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Semiconductor major Texas Instruments (NYSE: TXN) is expected to publish its Q3 2018 results on October 23, reporting on a quarter that is likely to have seen continued growth in the company’s Analog and Embedded Processing businesses. The company has projected revenues in the range of $4.11 billion to $4.45 billion for the quarter, with EPS projected to come at between $1.41 and $1.63. Here’s a quick overview of what to expect when the company publishes earnings Tuesday.

We have summarized our expectations for the company in our interactive dashboard, which outlines what to expect from TI’s full-year results You can modify the key drivers to arrive at your own price estimate for the company.

Analog Sales And Margins Could Expand 

TI’s analog semiconductor business, which accounts for around two-thirds of the company’s revenue, has been seeing stronger growth, with revenues rising by about 12% year-over-year during the second quarter, due to higher demand for the company’s power and signal chain products. It’s likely that the trend will continue. Margins for the business have also been trending upwards (up 250 bps year-over-year in Q2) driven by its manufacturing improvements, including its growing mix of output from its 300-millimeter process. The shift to this fab technology allows TI to cut production costs, boost capacity and allow it to respond to customer requirements more quickly. As of last year, about $4 billion of the company’s analog revenues came from the 300-millimeter process, accounting for about 40% of the segment’s revenues. It’s possible that the company could scale up margins more significantly as it increases its mix of 300-mm production.

Increasing Uptake From  Automotive And Industrial Verticles

TI has been focusing on bolstering sales to the industrial and automotive markets. Both verticals are seeing higher semiconductor content, and are also more diverse from an application standpoint. The company has seen broad-based growth, noting that sales grew in 18 of the 19 sub-segments in these two sectors. In comparison, the performance of the company’s other verticals has been more mixed. The company’s sales to the personal electronics segment have been growing at low-single digits, with sales to the communications equipment space posting year-over-year declines. However, sales to the communications space could pick up, with the commercial roll-out of 5G expected to commence in the United States this year.

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