This old-school chip tech company is also a sizable auto chip player. Texas Instruments Inc. (NASDAQ: TXN) is a global semiconductor design and manufacturing company that develops analog integrated circuits and embedded processors. The company generates 80% to 90% of its revenues from its analog and embedded processing businesses, which have well-diversified end-markets (autos, industrial, personal/consumer electronics), long product life cycles and limited capital intensity. The company has 6% market share of the auto chip market.
Numerous Wall Street pros see the stock as core large cap holding, and they cite a solid high-single-digit and very diverse revenue flow, solid capital allocation to lever the balance sheet if needed, and substantial room for margin expansion as the ramp up new facilities. The company boasts sustained impressive cash flow over the past several years and has impressively returned 100% plus of that back to shareholders via stock buybacks and dividends.
Given modest capital expenditure requirements coupled with room for margin expansion, Texas Instruments should be able to sustain double-digit free cash flow growth despite slower sales growth.
Texas Instruments also posted strong second-quarter numbers that exceeded consensus estimates, and its third-quarter guidance is in line with what analysts expect.
Texas Instrument investors receive a 2.17% dividend. The consensus price objective is $71.04. The shares closed Monday just below that at $70.14.
This is a top technology stock that has performed very well this summer. Qualcomm Inc. (NASDAQ: QCOM) is a world leader in 3G, 4G and next-generation wireless technologies. The company includes the licensing business, QTL, and the vast majority of its patent portfolio. Its subsidiary Qualcomm Technologies operates substantially all of Qualcomm’s engineering, research and development functions, as well as substantially all of its products and services businesses, including its semiconductor business, QCT.
The growth of 3G mobile technologies in emerging markets, like China and India, has had a positive impact on Qualcomm and could be a difference maker going forward. Qualcomm is and has been for years a market leader in the development of 3G CDMA (Code Division Multiple Access) technologies. The company recently developed an LTE chipset that supports SCDMA (Synchronous Code Division Multiple Access) technology. China’s mobile network runs on this, and it could provide the company with a huge leg up in years to come.
Qualcomm reported third-quarter revenue and earnings that beat Wall Street estimates. Fourth-quarter guidance was also better than expected. In China, new semiconductor products are gaining share and management is making better progress with royalty collections.
Investors are paid a 3.45% dividend. The consensus price objective is $61.85, and shares closed Monday just south of that level at $61.58.
These four companies blew past earnings expectations and also gave solid guidance. Investors should consider buying partial positions now and looking for a pullback to buy more shares.