Market forces rained on the parade of Texas Instruments Incorporated (NASDAQ:TXN) shareholders today, when the analysts downgraded their forecasts for this year. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon.
After the downgrade, the consensus from Texas Instruments' 29 analysts is for revenues of US$16b in 2024, which would reflect a definite 11% decline in sales compared to the last year of performance. Statutory earnings per share are anticipated to plunge 29% to US$5.08 in the same period. Previously, the analysts had been modelling revenues of US$18b and earnings per share (EPS) of US$6.51 in 2024. It looks like analyst sentiment has declined substantially, with a substantial drop in revenue estimates and a large cut to earnings per share numbers as well.
Check out our latest analysis for Texas Instruments
NasdaqGS:TXN Earnings and Revenue Growth January 28th 2024
Analysts made no major changes to their price target of US$169, suggesting the downgrades are not expected to have a long-term impact on Texas Instruments' valuation.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would highlight that sales are expected to reverse, with a forecast 11% annualised revenue decline to the end of 2024. That is a notable change from historical growth of 6.7% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 17% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Texas Instruments is expected to lag the wider industry.
The Bottom Line
The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for Texas Instruments. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected this year, we wouldn't be surprised if investors were a bit wary of Texas Instruments.
So things certainly aren't looking great, and you should also know that we've spotted some potential warning signs with Texas Instruments, including concerns around earnings quality. For more information, you can click here to discover this and the 1 other risk we've identified.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
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