Key Points
- Revenue of $3.82 billion falls within management's guidance.
- Earnings per share (EPS) of $1.22 came in near the upper end of expectations.
- Texas Instruments is making significant investments in advanced manufacturing technologies.
Semiconductor designer and manufacturer Texas Instruments (TXN -0.29%) reported second-quarter 2024 results on Tuesday that matched management's expectations in key metrics.
Revenue for the quarter was $3.82 billion and came in slightly above the midpoint of the company's guidance. Earnings per share (EPS) came in at $1.22 with the help of a 5-cent-per-share benefit from unanticipated items. That put it near the higher end of the guidance range.
Both revenue and profits saw substantial declines compared to the previous year, but the quarter showed sequential growth. Texas Instruments has now posted seven straight quarters of declining sales and earnings on a year-over-year basis.
| Metric | Q2 2024 | Management Guidance | Q2 2023 | Change (YOY) |
|---|---|---|---|---|
| Revenue | $3.82 billion | $3.65 billion - $3.95 billion | $4.53 billion | (16%) |
| EPS | $1.22 | $1.05 - $1.25 | $1.87 | (35%) |
| Free Cash Flow (TTM) | $1.5 billion | N/A | $3.18 billion | (53%) |
| Capital Expenditures (TTM) | $5 billion | N/A | $4.19 billion | 18% |
Source: Expectations are based on management's guidance, as provided in the prior quarter's earnings report. YOY = Year over year.
Overview of Texas Instruments' business
Texas Instruments is a multinational semiconductor company known for designing and manufacturing a broad array of analog and embedded processing chips. These components are essential in various electronics, making TI a significant player in industries like automotive, industrial automation, and personal electronics. The analog segment alone generated 74% of the company's revenue in 2023, emphasizing its importance.
Recently, TI has concentrated on long-term growth through significant investments in advanced manufacturing and disciplined capital allocation. Noteworthy strategic moves include a $5 billion investment in capital expenditures over the last 12 months, focusing on advanced 300mm wafer production, which is expected to reduce per-chip costs by 40%. These initiatives highlight Texas Instruments' focus on maintaining a competitive edge in technology and manufacturing.
Key quarterly highlights
The second quarter of 2024 saw several noteworthy developments for TI. Despite a challenging year-over-year decline in revenue and profitability, specific strategic areas received positive focus.
Revenue for the Analog segment fell by 11% year over year to $2.93 billion. The drop lowered operating profit for this segment by 28% to $1.05 billion. Management noted declines in the industrial and automotive verticals, although other end markets showed sequential growth.
Free cash flow for the trailing 12 months fell to $1.5 billion, down by 53% from the previous year's $3.18 billion. This decline raises potential concerns about future shareholder returns. Despite this, TI's focus remained on long-term resilience through strategic investments in advanced manufacturing technologies, underlined by a robust 12-month operational cash flow of $6.4 billion.
Capital allocation continues to be a disciplined practice for TI, as evidenced by an increase in dividends paid (up 6% to $1.19 billion) and a significant reduction in stock repurchases (down 91% to $71 million). Total cash returned to shareholders amounted to $1.26 billion, a 25% drop from the previous year.
Texas Instruments management highlighted the company's market and customer reach expansion efforts this quarter. The company's website, TI.com, has become an essential direct sales channel, contributing significantly to revenue. In 2023, management said 75% of revenue was generated through direct sales channels. This practice boosts relationship depth and customer loyalty, supporting sustained revenue growth.
Looking ahead
For the third quarter of 2024, TI’s management guided for an expected revenue range of $3.94 billion to $4.26 billion, and an EPS between $1.24 and $1.48. This outlook indicates a 10% drop in revenue year over year at the midpoint and a 26% drop in EPS year over year. On a positive note, both estimates point to decent sequential growth.
As investors look ahead, it's crucial to monitor several factors, including the ongoing performance of the Analog segment and free cash flow trends. Key areas to watch include TI's strategic investments in advanced manufacturing technologies and its disciplined approach to capital allocation.
