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Will Texas Instruments (TXN) Earnings Surprise this Season? - Analyst Blog

Zacks Equity Research
Updated

Texas Instruments (TXN), or "TI”, is set to report fourth-quarter 2014 results on Jan 26. Last quarter, the company posted a 7.0% positive surprise. Let’s see how things are shaping up for this announcement.

Factors to Consider

TI’s third-quarter earnings comfortably surpassed the Zacks Consensus Estimate driven by an improving mix of business and efficient cost control. Also, revenues increased 6.3% sequentially and 7.9% year over year, backed by strong growth in communications, equipment, industrial and automotive markets. Enterprise systems grew, but personal electronics remained pressured by the phase out of the company’s legacy wireless products.

TI’s gross margin of 58.4% was up 124 basis points (bps) sequentially and 354 bps year over year. Higher volumes, lower underutilization charges and production efficiencies led to the sequential increase.

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TI’s compelling product line-up, increasing differentiation in its business and lower-cost 300-mm capacity should drive earnings, going forward.

For the fourth quarter of 2014, TI expects revenues within $3.13–$3.39 billion. Earnings per share are expected in the range of 64–74 cents.

Earnings Whispers?

Our proven model does not conclusively show that Texas Instruments will beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 69 cents. Hence, the difference is 0.00%.

Zacks Rank: Texas Instrument has a Zacks Rank #2 (Buy) which when combined with a 0.00% ESP makes surprise prediction difficult.

We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stocks to Consider

You could consider the following stocks with a positive Earnings ESP and a favorable Zacks Rank:

The Allstate Corporation (ALL), with an Earnings ESP of +3.05% and a Zacks Rank #1 (Strong Buy).

Spirit AeroSystems Holdings, Inc. (SPR), with an Earnings ESP of +7.79% and a Zacks Rank #1.

Knight Transportation Inc. (KNX), with an Earnings ESP of +3.03% and a Zacks Rank #1.


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TEXAS INSTRS (TXN): Free Stock Analysis Report
 
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SPIRIT AEROSYS (SPR): Free Stock Analysis Report
 
KNIGHT TRANSN (KNX): Free Stock Analysis Report
 
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Zacks Investment Research