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Texas Instruments Raises Earnings, Revenue Target

Daniel Acker | Bloomberg | Getty Images

Texas Instruments raised its targets for first-quarter earnings and revenue to the upper end of its previous forecast ranges, due to improving demand for its chips in an industry that has been hit for several quarters by a weak global economy.

TI, a maker of chips for a wide array of products ranging from computers to industrial equipment, said on Thursday that chip orders were increasing and that it expects the trend to continue.

While Ron Slaymaker, head of investor relations, said that TI was still seeing weakness in sales of chips for notebook computers and communications infrastructure, he cited a noted improvement in orders from TI's industrial customers and better-than-expected wireless chip sales.

Overall, Slaymaker said TI's chip order backlog was growing for the first time in several quarters, and that it appeared to come from improving demand from end-users rather than chip inventory restocking at its customers.

"We're clearly expecting growth in the second quarter," Slaymaker told analysts on a conference call.

TI executives had spoken in bleaker tones after their quarterly earnings report in January, citing customer wariness about over ordering due to economic weakness in Europe and China and uncertainty about U.S. government policies.

However, analysts were cautious about celebrating and TI's shares fell slightly in late trade.

Bernstein analyst Stacy Rasgon said TI's comments about strength in its industrial business were encouraging as was its suggestion of improving customer demand that was unrelated to changes in chip inventory levels.

"Those are good things and indicative that maybe things are getting better," he said but added that it was not necessarily a sign of a strong recovery for the broader semiconductor market.

"I'm not ready to jump on the economic recovery bandwagon yet," Rasgon said. "It's modestly encouraging."

Freescale Semiconductor Ltd <FSL.N>, a maker of chips for cars and machinery, had also forecast current quarter revenue that was better than expected in late January citing improvements in its wireless and enterprise business.

While demand for chips used in tablets and handsets was better than expected, Slaymaker noted that the company's revenue from wireless would still decline in the first quarter as TI is gradually shutting down its wireless chip business.

TI said it now expects first quarter earnings per share of 28 to 32 cents, compared with its previous target range of 24 to 32 cents and implying a new midpoint of 30 cents compared with 28 cents.

It forecast revenue in a range of $2.80 billion to $2.91 billion, which compared with its January forecast for a range of $2.69 billion to $2.91 billion.

The $2.855 billion midpoint of the updated revenue range was above Wall Street expectations for $2.8 billion, according to Thomson Reuters I/B/E/S.

Williams Financial analyst Cody Acree said that the industry was likely in the early stages of a broader improvement.

"While market signals continue to be mixed, we do believe TI is one of the best vehicles for investors to participate in what we believe to be the early stages of an improving semiconductor cycle," Acree said in a research note.

TI shares were down slightly at $35.11 in after hours trade after closing at $35.20 in the regular Nasdaq session. The stock has risen 5 percent since January 22 as investors have been betting on an improvement in demand for TI.