Shareholders of Texas Instruments Incorporated (NASDAQ:TXN) will be pleased this week, given that the stock price is up 11% to US$177 following its latest first-quarter results. Revenues were US$3.7b, approximately in line with expectations, although statutory earnings per share (EPS) performed substantially better. EPS of US$1.20 were also better than expected, beating analyst predictions by 12%. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Texas Instruments after the latest results.
After the latest results, the consensus from Texas Instruments' 30 analysts is for revenues of US$15.7b in 2024, which would reflect a measurable 6.3% decline in revenue compared to the last year of performance. Statutory earnings per share are expected to crater 21% to US$5.13 in the same period. In the lead-up to this report, the analysts had been modelling revenues of US$15.6b and earnings per share (EPS) of US$5.03 in 2024. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.
It will come as no surprise then, to learn that the consensus price target is largely unchanged at US$176. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Texas Instruments, with the most bullish analyst valuing it at US$225 and the most bearish at US$115 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
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 revenue is expected to reverse, with a forecast 8.3% annualised decline to the end of 2024. That is a notable change from historical growth of 6.3% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 17% per year. It's pretty clear that Texas Instruments' revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting that it's tracking in line with expectations. Although our data does suggest that Texas Instruments' revenue is expected to perform worse than the wider industry. The consensus price target held steady at US$176, with the latest estimates not enough to have an impact on their price targets.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Texas Instruments going out to 2026, and you can see them free on our platform here.
However, before you get too enthused, we've discovered 2 warning signs for Texas Instruments (1 can't be ignored!) that you should be aware of.
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