Texas Instruments Inc. is set to report its third-quarter results after the close of markets on Tuesday amidst concerns of headwinds in the semiconductor sector. Analyst Stacy Rasgon from Bernstein highlights the presence of “tactical risk” as Texas Instruments prepares to give its fourth-quarter outlook. Rasgon believes that there is a possibility of a substantial reset to 2024 numbers on the guide. He also expresses concerns about the “structural headwinds to gross margins” that have not been properly accounted for in Street numbers, leading him to adopt an underperform stance in late August.

Expectations for the Quarter

Analysts anticipate that Texas Instruments will report a decline in earnings per share for the fourth consecutive quarter on an adjusted basis. While revenue is expected to decline significantly compared to the previous year, it is projected to show a sequential increase.

Key Numbers to Look Out For

  1. Earnings: The FactSet consensus calls for $1.82 in fiscal third-quarter earnings per share, down from $2.47 in the year-earlier period.

Additional Information

For further details on Texas Instruments’ performance and outlook, please refer to the full report.

Revenue

Analysts expect Texas Instruments, the chip maker, to report a fiscal third-quarter revenue of $4.579 billion, which is a decrease compared to $5.241 billion in the same period last year. The consensus from FactSet calls for $3.296 billion from Texas Instruments’ analog business and $887 million from embedded processing.

Stock Movement

During the last quarter, Texas Instruments’ outlook overshadowed its earnings beat, resulting in a 5.4% decline in the company’s stock the day following its results. So far this year, Texas Instruments’ stock has fallen 11.4%, while the S&P 500 index has gained 10.3%.

Analyst Perspectives

  1. Susquehanna Financial Group analyst Christopher Rolland believes that the industrial sector weakened during the quarter, primarily due to the slowdown in China. This could have knock-on effects for the EU as well. Rolland suggests that analog names such as MCHP, POWI, and TXN could be most affected by this situation.

  2. Oppenheimer analyst Rick Schafer predicts sustained margin pressure for Texas Instruments in the near to medium-term. This is due to management’s investments in capacity, resulting in increased depreciation and aggressive commodity pricing for power management integrated circuits in China, accounting for around 20% of sales. Schafer believes that TI’s battle of attrition with smaller suppliers in China may persist for the foreseeable future.

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