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Texas Instruments stock rises on Q4 earnings beat, sees worst sales decline since 2022

Yahoo Finance Live anchors discuss the rise in stock for Texas Instruments following fourth-quarter earnings.

Video Transcript

[AUDIO LOGO]

BRIAN SOZZI: Let's check in on some other trending tickers not named Microsoft. Chipmaker giant Texas Instruments posted an earnings beat for the fourth quarter, but had its worst sales decline since 2020. The company also issued weaker-than-expected guidance, kind of like Microsoft, for the first quarter as CEO Rich Templeton point to slowing demand in all end-- all end markets, except I should add, the auto-- except the auto market. I beat you to it, Julie.

But overall, seeing weakness in lots of different places. Also worth pointing out, the industrial end market, which is about 40% of Texas Instruments' 2022 sales, sales there decline at 10% sequentially. That is a huge, huge drop.

BRAD SMITH: Yeah, and for Texas Instruments, they had shifted a lot of their business. Of course, many of us know them for the TI-81+ calculators from way back in the day. But, you know, even beyond that, I think within the functionality of vehicles, that's where they've really been able to-- kind of really paint themselves this lucrative corner, as long as they're continuing to be able to, like many other of the chip manufacturers, make sure that the materials that they need in order for them to service many of the vehicles and the broader market there, that continues to come online.

But I think for Texas Instruments, some of the other tailwinds that they could see also showed up for ASML, too. And particularly what that looks like more internationally is what ASML has called out in China, particularly.

JULIE HYMAN: Yeah, I mean, if you look at these two, they're a good early read on what's going on in the chip industry. Texas Instruments has the longest list of customers of anyone in the chip business. It just makes chips that go into everything. And so it is interesting that everything except auto was not doing great.

At the same time, the company is saying it has no plans to cut jobs. So it is sort of-- it feels like the semiconductor industry is waiting for the next upstream swing, right? We are in this down part of that chip cycle. But maybe we're gonna get back up there. You know, they don't want to let people go in anticipation of that, perhaps.

When it comes to ASML interesting there because the numbers were better than estimated. The sales projection better than estimated. But ASML calling out some of the Chinese control measures or the sort of getting caught in the middle of the ongoing tension between US and China and the effect that could have on sales. So that seems to be more of a pressure on that stock than the actual numbers.

BRIAN SOZZI: I do wonder if TI will have to start or look at least layoffs. A couple of things, in addition, to add here. They did notice an increase in cancellations in the quarter, along with some customers pushing out orders. So that is-- you never want to hear that.

And then secondarily, their first quarter EPS guidance, 164 to 190, was really well below consensus on the bottom end of 186. So a big whiff there. And, you know, job cuts, those-- that-- announcements of that have been rewarded by the market so we'll see.

BRAD SMITH: Yeah, semis-- keep a close eye on SOXX as well, iShares Semiconductor ETF. I've been tracking this one. And even in last year when you had some of the more significant declines across the industry or across at least this sector here, and it was down by, I believe it was about-- doing some quick charting here-- by about 35% last year, 35% 36% last year.

However, early year, January right now, up by about 14%. So some of that rebound or at least some of the prospect of this industry turning is starting to be priced into some of these shares, too.

JULIE HYMAN: Yeah, I mean, I think the other thing is as we talk about all of these industries girding for a slowdown, even in boom times, the semiconductor industry is used to being highly, highly cyclical because it is a commodity industry that tends to experience these inventory gluts and then, you know, shortages.

So perhaps also the people who cover the industry, the people who invest in the industry, maybe they're a little bit more used to this sort of up and down cycle. I don't know. I'm just I'm just spitballing here.

BRIAN SOZZI: Yeah, no, seems fair. You didn't get the sense that TI is pulling back on investments. This company remains very aggressive in building out capacity, which is weird to your point because demand seems to be falling off a cliff.

JULIE HYMAN: Well, and a lot of this capacity build that we're talking about for the semi industry right now is very long term anyway, especially when we're talking about some of its competitors building new plants in the US, for example. I mean, that's not something you're gonna cancel overnight because you're seeing two, even three, even four quarters of declines, right? If you're building out the factory for 2025 or 2026.

BRIAN SOZZI: Right, and Brad, you mentioned the calculator. I recently got a TI last year. And it was cool because you're able to plug it in and recharge it. And I thought back to when I got one in fifth grade. It was $150 and had batteries in it. So talk about technological wonders. That's it for me.

BRAD SMITH: You voluntarily went out and got one? And it wasn't--

BRIAN SOZZI: Yeah, I wanted one. I have it in my bag. I'll show you after the show. Yeah.