Texas Instruments Nails Q2 Numbers, But Guidance Short-Circuits Rally

Shares of Texas Instruments Inc (NASDAQ:TXN) tanked in early trading on Wednesday, despite the company reporting upbeat second-quarter results.

Here are some key analyst takeaways.

• JPMorgan analyst Harlan Sur reiterated an Overweight rating, while raising the price target from $195 to $225.
• Benchmark analyst Cody Acree maintained a Buy rating, while lifting the price target from $200 to $220.
• Rosenblatt Securities analyst Kevin Garrigan reaffirmed a Buy rating and price target of $245.
• BofA Securities analyst Vivek Arya reiterated a Buy rating and price target of $218.

Check out other analyst stock ratings.

JPMorgan: Texas Instruments reported strong results for the second quarter, with revenue, margins and earnings topping expectations. The company's sales came in at $4.45 billion, up 9.3% sequentially and 16% year-on-year, above the consensus of $4.36 billion.

Revenues were driven by "cyclical recovery trends and potential demand pull forward in industrial end markets and China geography," Sur said in a note. The impact of tariffs is “beginning to emerge" and could continue to create a "slightly weaker than seasonal demand environment as the year progresses.”

Benchmark: Texas Instruments managed to beat expectations in the June quarter. Customers ordered ahead to build inventory before the expected tariff increases, Acree said. The company's Auto business was the only segment to decline sequentially during the quarter, he added.

Management provided slightly disappointing earnings guidance for the September quarter, the analyst stated. "We understand the company's somewhat more conservative tone and don't believe it is indicative of any broad deterioration in semi-industry fundamentals, but a natural customer reaction to heightened tariff uncertainty, that looks to have been a somewhat transitory issue, as the Trump administration now appears to be increasingly willing to negotiate deals with our trading partners," he added.

Rosenblatt Securities: Texas Instruments' gross margins expanded to 57.9%, topping the consensus of 57.4%, Garrigan said. GAAP earnings came in at $1.41 per share, ahead of the consensus of $1.36 per share, he added.

Despite the beat, the company's stock headed south during Tuesday's after-hours, due mainly to elevated expectations, the analyst stated. "On the cycle, management commented that tariffs and geopolitics are disrupting global supply chains and impacting visibility, but the cyclical recovery is continuing with customer inventories remaining low," he further wrote.

BofA Securities: Texas Instruments guided to third-quarter sales of around $70-$100 million, which came in lower than expected, Arya said. The guidance reflects 11% year-on-year growth, while expectations were for at least 13%, he added.

Investors were also disappointed by management's "more balanced tone," which was mainly due to uncertainties around US tariffs and China's order patterns, the analyst stated. "While macro uncertainty could mean a lumpier recovery, TXN and the analog industry are still shipping below trendline demand," he further wrote.

Price Action: Shares of Texas Instruments had declined by 12.30% to $188.49 at the time of publication on Wednesday.

Read More:

• Texas Instruments Reports ‘Shallow’ Auto Recovery, Cites Geopolitical Risks And Tariff Impact On Supply Chains

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