TI Steady After Disappointment? Here's Why

Texas Instruments
L.m. Otero
Texas Instruments

You'd think with the 3-plus percent rally in Texas Instruments' shares headed into tonight's earnings, this company would be plunging now, after missing numbers across the board.

But that's the joy of the markets right now: good news is great; great news is stratospheric; and bad news is, well, just expected -- so it's not all that "newsy."

The company reported 49 cents per share on $3.27 billion, but that EPS figure also included a 6-cent, one-time discrete tax benefit, so the apples-to-apples comparison with the Thomson consensus is 43 cents, or right in line with expectations. Revenue was a little lighter than the $3.28 billion expected by analysts.

TI also reports $3.22 billion in orders, which is noticeably down from the $3.48 billion the company reported in its fourth quarter.

"That's a problem," John Lau at Jefferies tells me. That's another strong indication of a slowdown, and dovetails with TI's far weaker-than-expected guidance.

Texas Instruments now anticipates an EPS range of 42 cents to 48 cents, far below the 51 cents Wall Street expected. The revenue range the company is providing is also well below consensus: $3.24 billion to $3.5 billion versus the $3.51 billion Street analysts were projecting.

Lau at Jefferies thought Texas Instruments would beat the Street for its first quarter. But as one of the Top 3 chip companies in the world, the top analog company in the world, it's gonna take a lot to hurt them, he says. Strong cash flow, no debt, and good trends longer term, he says, makes TI one of the top quality chip companies in the world.

It all comes to down to analog. And cash flow generation. And no debt. And that defendable market share position.

Look at Intersil, Linear Technology or Xilinx: Analog players that have all seen big-time gains these last few months.

Texas Instruments hasn't yet played in those kinds of rallies, but now that we have an idea of where its business is going, some analysts are telling me it's poised to pick up momentum, since big funds will see the trends shaping up at these smaller players, and want to snap up TI at its bottom. And this might be viewed as the bottom.

And that might be the best reason yet why the company is weathering less than stellar guidance, as investors start looking at the company longer-term, seeing real growth potential just over the horizon.

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