Texas Instruments gives strong forecast but urges caution

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(July 22): Texas Instruments Inc. projected revenue in the current quarter that topped analysts’ estimates, saying orders haven’t fallen off as much in the coronavirus pandemic as they did in the last recession. The chipmaker’s executives, however, cautioned that the positive outlook isn’t a sign the economy is on the upswing.

“It seems clear that things are a little shaky in the world economy,” Chief Financial Officer Rafael Lizardi said Tuesday in an interview. “My job is not to figure out where the world economy is going, it’s to put TI in the best position whatever happens.”

Lizardi and his colleagues faced a barrage of questions on a conference call from analysts trying to find out whether the unexpected strength in orders came from Texas Instruments’ customers trying to cushion themselves against potential supply disruptions or a pickup in global demand for electronics.

“Frankly, the reality is we don’t know,” said Lizardi. Texas Instruments has more than 100,000 customers and “some of them don’t know either,” he said.

The company projected earnings will be $1.14 to $1.34 a share, on revenue of $3.26 billion to $3.54 billion, in the period ending in September. On average, analysts predicted profit of 98 cents and sales of $3.07 billion, according to data compiled by Bloomberg.

Texas Instruments has the broadest customer list and biggest product catalog in the industry. The company is the first major U.S. manufacturer to report earnings. Its reach gives investors a forward look into demand for everything from space hardware to home electronics.

“The business has certainly troughed and is starting to show signs of life again,” said Logan Purk, an analyst at Edward Jones. Still, the pandemic and continuing trade strife between the U.S. and China may hurt demand in the near future, he said.

Covid-19 illnesses have shut factories and transportation worldwide, placing an unprecedented strain on a global supply chain that provides electronics makers with components only at the moment they need it. Chip consumers -- everyone from automakers to Apple Inc. -- may now want stockpiles to guard against future disruptions and make sure they can keep manufacturing rolling.

The chipmaker said it would keep production running and build its own inventory to make sure it can satisfy the demand.

Texas Instruments “did not experience the depths of the downturn we saw in the 2008 downturn,” Dave Pahl, head of investor relations, said on the conference call. Still, “we remain cautious on how the economy might behave for the next few years,” he said.

In the second quarter, net income rose to $1.38 billion, or $1.48 per share, from $1.31 billion, or $1.36, a year earlier, the Dallas-based company said in a statement. Revenue dropped 12% to $3.24 billion.

Shares increased about 1% in extended trading after closing at $135.48 in New York. The stock is has gained 5.6% this year, lagging behind the Philadelphia Stock Exchange Semiconductor Index’s advance of 13%.