|Texas Instruments' Top Line Can't Inspire |
By Alexei Oreskovic
TheStreet.com Staff Reporter
10/24/2005 6:49 PM EDT
Updated from 5:55 p.m. EDT
Shares of Texas Instruments (TXN:NYSE - commentary - research - Cramer's Take) fell in late trading after the chipmaker's third-quarter report delivered a merely expected top-line performance, while projections for the fourth quarter promised nothing better.
The stock was recently off nearly 4% to $29.77 in after-hours trading.
The company said late Monday that earnings for the quarter ended Sept. 30 were $638 million, or 38 cents a share, from $563 million, or 32 cents a share, a year earlier.
The latest quarter included expenses of 3 cents a share for additional stock compensation, while higher-than-expected taxes hurt the bottom line by a penny a share.
Excluding these items, the company earned 42 cents a share, but it was unclear whether the Thomson First Call estimate of 40 cents a share also excluded the one-penny tax hit.
Revenue rose to $3.59 billion, up 11% sequentially and up 10% from a year earlier. The results just edged the $3.55 billion that was the midpoint of the company's own guidance and the consensus expected by analysts.
According to the company, the results were owed to strong demand for its digital signal processor and analog chips used in cell phones and other communications devices. With $3.13 billion in revenue, the company's semiconductor division provided the strongest growth engine, increasing 13% from the previous quarter.
In September, the company raised its guidance for the third quarter, raising its expected EPS range to 39 cents to 41 cents a share from 34 cents to 38 cents a share, excluding the stock option charge. The company also lifted its revenue range to between $3.48 billion and $3.62 billion, compared with its earlier range of $3.29 billion to $3.56 billion.
The company continued to make strides in its margins, turning out 49.3% gross margins, up from the previous quarter's 47%, and within striking distance of its 50% target. Likewise, the 22.7% operating margin, up from the second quarter's 20.6%, represented an all-time high. Texas Instruments has set a long-term 25% operating margin target.
For the fourth quarter, TI expects to earn 36 cents to 40 cents a share; as with the third quarter this included 3 cents a share in stock-based compensation expense.
The current First Call estimate is 41 cents a share, excluding the expense.
TI anticipates fourth-quarter revenue of $3.43 billion to $3.72 billion, suggesting a midpoint of $3.57 billion, slightly below analysts' consensus of $3.63 billion.