Texas Instruments: Earnings Half Full or Half Empty? (TXN, BRCM, QCOM, SMH)

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Texas Instruments,Inc. (NYSE:TXN) will post earnings after the close, and First Call estimates are $0.42 EPS and $3.45 billion in revenues.  We usually get guidance of out of Texas Instruments, and next quarter consensus is $0.49 EPS on $3.7 billion revenues with fiscal December-2007 $1.76 EPS on $14.1 Billion revenues.

It wasn’t all that long ago that shares of Texas Instruments were in a slump, and it has gained with the sector.  Shares are up some roughly 30% since the start of April.  Analysts have an average price target just north of $40.00, not much higher than the $38.60 price today.  This implies that if analysts are going to endorse the stock that they will have to raise targets for the mobile chip and components giant.  Shares of the Semiconductor HOLDRs (NYSE:SMH) were at an adjusted $33.35 on April 2, so those shares are up less than Texas Instruments with their 20% performance since that date.

If there is a sell-off in shares, technicians may view the chart as no longer being in a near-term up-trend.  Longer-term chartists still have a decent cushion before they’d start really worrying.  Shares trade currently with a forward P/E ratio for 2007 of 21.8.  Perhaps the most interesting notes will be what this company says about cell phone makers.  Companies to watch based on Texas Instruments are Broadcom (NASDAQ:BRCM) (Broadcom just reported last week) and Qualcomm (NASDAQ:QCOM), although it is big enough it can spill over into many chip names.  What has accounted for part of recent outperformance?  Ties and more hopes for Apple’s (NASDAQ:AAPL) iPhone. 

Just last quarter the company noted it was seeing a rebound in orders and expected to see sequential growth. On the June 11 mid-quarter update, TI gave the following guidance: Total revenue between $3.36 billion and $3.51 billion, compared with the prior range of $3.32 billion to $3.60 billion; Semiconductor revenue between $3.20 billion and $3.34 billion, compared with the prior range of $3.14 billion to $3.40 billion; and Education Technology revenue between $160 million and $170 million, compared with the prior range of $180 million to $200 million (lower estimate reflects delays by retailers in stocking their back-to-school calculator inventory until closer to the start of school in the third quarter).  TI also said its expects EPS from continuing operations between $0.40 and $0.44, compared with the previous range of $0.39 to $0.45.

Jon C. Ogg
July 23, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.