24/7 Wall St.

Texas Instruments Inc. (NASDAQ: TXN) may have just given the preliminary earnings report yelling “All clear in Chip Land!” in its mid-quarter update, but the reality is that the company just told investors something else. We think this is a declaration that investors in chip stocks and semiconductor stocks now have to become extremely picky about what stocks they are willing to chase. Most companies have opted to shy away from guidance this regularly now, so it is at least refreshing to see that the guidance was not lowered even if some media outlets may warn that the sales guidance is marginally soft.

The semiconductor giant narrowed its expected ranges for revenue and earnings per share. While we would not exactly take this as a “raised guidance” on the ranges it certainly beats down some of the notion that semiconductor sales are heading south for the winter. TI’s new sales range is $3.15 to $3.29 billion, versus a prior range of $3.09 to $3.35 billion. In short the new mid-point is $3.22 billion versus a prior mid-point of $3.22 billion. Again, it is not a raised guidance but it is not a lowered guidance. Thomson Reuters’ consensus estimate is $3.23 billion, so maybe you can call it a tad shy or maybe it is a simple rounding error.

TI now sees earnings coming in at $0.51 to $0.55 per share versus a prior range of $0.49 to $0.57 per share. That leaves the mid-point static at $0.53, so guidance was not raised nor lowered. The Thomson Reuters consensus is $0.53 in earnings.

Broadcom Corp. (NASDAQ: BRCM) announced just a week ago that it was acquiring the LTE-related assets from affiliates of Renesas Electronics Corp. for some $164 million and then it updated its quarterly business outlook for revenue of between $2.075 billion and $2.175 billion. It said:

GAAP and non-GAAP product gross margins to be up roughly 50 to 100 basis points; and GAAP and non-GAAP research and development, and selling, general and administrative expenses to be somewhat above the high-end of the previously guided range of down ~$5 million to up ~$15 million and flat to up ~$20 million, respectively.

When Broadcom made its acquisition its stock rose almost 3% to $25.92 and the shares recently closed at $26.76 despite a modestly down day on Tuesday. Texas instruments shares closed up 1.4% at $40.31 on Tuesday and shares have given that gain all back down to $40.30 or so in the after-hours session.

The real impact here is that Texas Instruments hit a new 52-week high of $40.36 on Tuesday ahead of the quarterly guidance. With Broadcom at $26.76, its 52-week range is $23.25 to $37.85. In short, the benchmark for TI is set very high while the benchmark for Broadcom now appears to be set very low.

The overall semiconductor sector is also one where the bar has now moved higher. The key exchange-traded fund is the Market Vectors Semiconductor ETF (NYSEMKT: SMH) and it closed up 1.8% at its intraday high of $39.58 against a 52-week range of $30.00 to $39.72.

It looks like this could be a quarter where semiconductor and technology stocks have to do well to please investors. Mediocrity just might not cut it this time around.