Texas Instruments Beats Q3 Expectations, But Analysts 'Don't Yet See The Lift-Off In Sales Growth'

Shares of Texas Instruments Inc TXN spiked in early trading on Wednesday, after the company reported its third-quarter results.

The company reported its results amid an exciting earnings season. Here are some key analyst takeaways.

Bank of America Securities analyst Vivek Arya reiterated a Neutral rating, while cutting the price target from $220 to $215.
JPMorgan analyst Harlan Sur reaffirmed an Overweight rating and price target of $230.
Benchmark analyst Cody Acree reiterated a Buy rating and price target of $230.
Rosenblatt Securities analyst Hans Mosesmann maintained a Buy rating and price target of $250.

Check out other analyst stock ratings.

BofA Securities: "We don’t yet see the lift-off in TXN sales growth," Arya said in a note. He added that rising depreciation creates a headwind for the company's gross margins in 2025. That doesn’t appear to be “fully captured” in consensus estimates.

Texas Instruments provided "sluggish" guidance for the fourth quarter. However, the stock rose in after-hours trading on expectations of an end to inventory correction, the analyst stated. "On the positive side, TXN continues to build a comprehensive manufacturing footprint that could provide low-cost capacity in next upcycle," he further wrote.

JPMorgan: Texas Instruments delivered a beat on revenues, margins and earnings for the third quarter, "reflecting gradually improving cyclical trends," Sur said. All regions except EMEA (Europe, the Middle East and Africa) grew sequentially in the quarter, he added.

Management guided to a 7% sequential contraction in sales, missing consensus, the analyst stated. "We believe the outlook reflects gradually improving cyclical trends albeit at a slower pace given the more muted demand trends in industrial/auto end markets," he further wrote.

Benchmark: Texas Instruments delivered better-than-expected results for the third quarter. But, fourth-quarter guidance for both revenue and profit missed expectations, Acree said in a note. Investors reacted positively, as they were bracing for an even more conservative outlook, "following disappointing recent news out of much of the automotive sector.”

Elevated inventory should allow the company to "aggressively compete for sockets it was forced to pass on during the period of COVID-related supply constraints," which should continue the current momentum in its non-Auto and Industrial businesses, the analyst stated. This should allow Texas Instruments to "flex its supply and capacity strengths as its broader core markets begin to see shipments return to consumption levels next year," he further wrote.

Rosenblatt Securities: Texas Instruments guided to fourth-quarter revenues in the range of $3.7 billion to $4 billion. It missed the consensus of $4.1 billion at the midpoint, Mosesmann said. The company projected earnings of $1.18 per share at the midpoint. That’s lower than the consensus estimate of $1.36 per share, he added.

The recovery in the company's non-strategic segments of personal electronics, communication, and enterprise, all of which delivered 20%-30% sequential growth in the third quarter, is being considered by investors as indicators of a potential recovery in the strategic industrial/automotive segments in the first half of 2025, the analyst stated.

"To support analog sales growth, firms need to invest in new equipment (rather than reusing existing equipment), and we do not foresee the industry (including foundries, joint ventures, and analog companies) keeping pace with the approximately six 300mm fabs that TI's roadmap outlines into the 2030s," he further wrote.

Price Action: Shares of Texas Instruments had risen by 3.46% to $200.69 at the time of publication on Wednesday.

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