Texas Instruments Inc. reported first-quarter revenue that beat analysts’ estimates, helped by customers stocking up on components to avoid potential supply disruptions caused by the Covid-19 pandemic. It also forecast sales that exceeded some Wall Street expectations.
Chief Executive Officer Rich Templeton made a rare appearance on an earnings conference call to emphasize that the company will keep plants running and maintain spending on research and new production. The chipmaker also stuck to its pledge to return free cash flow to investors though share buybacks and dividends. The stock rose in extended trading.
First-quarter net income fell to $1.17 billion, or $1.24 cents per share, from $1.22 billion, or $1.26 per share, from a year earlier. Revenue dropped 7% to $3.33 billion. That easily beat Wall Street expectations, according to data compiled by Bloomberg, although there was a wide range of forecasts.
Texas Instruments said second-quarter earnings will be 64 cents to $1.04 a share, on revenue of $2.61 billion to $3.19 billion. On average, analysts predicted profit of 93 cents and sales of $3.1 billion. One analyst was looking for revenue to be as low as $2.5 billion.
“With a COVID-19 recession likely upon us, and with reduced visibility of customer demand, we are using the 2008 financial crisis to model our second quarter outlook,” the company said. “To reflect the increased uncertainty, we have expanded the range of our guidance.”
Texas Instruments is the first major U.S. chipmaker to report results following the lockdown of the much of the population in an attempt to contain the spread of the virus. The company’s semiconductors are in everything from dishwashers to satellites, making the business an important indicator of demand across the economy.
Executives said they’re seeing short-term demand from customers building chip inventories. When that’s complete, the company expects demand to fall, and it is predicting orders will decline in May.
The chipmaker is nonetheless determined to keep production running and build its own stockpile to make sure it can satisfy any snap-back in demand that happens once the pandemic has passed.
“Many customers are still processing what’s happening,” said Chief Financial Officer Rafael Lizardi on the conference call. “This thing could go multiple ways in the second quarter and the third.”
Under Templeton, the chipmaker has bet on expanded use of electronics in vehicles and industrial systems. Car sales have plummeted during the pandemic and production has halted at many different factories.“Automotive, industrial and consumer are the end markets most impacted by the pandemic,” Susquehanna Investment Group analyst Christopher Rolland wrote in a research note before Tuesday’s results. He cited predictions that vehicle sales will decline 11% this year and noted that economic indicators related to manufacturing are at the lowest levels since the financial crisis in 2009.
Texas Instruments shares rose 2% in extended trading after closing at $106.84 in New York. The stock is down 17% this year, a steeper decline than the Philadelphia Stock Exchange Semiconductor Index. The shares have surged in the past six years, partly based on stock buybacks and dividends.
“Our objective is to return all free cash flow to the owners of the company,” Lizardi said on Tuesday.
(Updates with executive comments throughout)
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