Texas Instruments Inc. Earnings: Could've Been Worse

Image source: Texas Instruments.

Texas Instruments just reported second-quarter results. The semiconductor giant rarely surprises or disappoints investors very much in these reports, and this one's no different: Both earnings and sales were right in line with analyst estimates.

Sales fell 2% year over year to land at $3.23 billion. That's a rounding error below the Street consensus at $3.26 billion.

On the bottom line, GAAP earnings rose 5% to $0.65 per share -- exactly in line with analyst targets.

Among Texas Instruments' product lines, the automotive segment showed brisk order volumes while customers in communications equipment held on to their purses a bit tighter. The analog and embedded processing segment, which represented 85% of TI's sales this quarter, delivered modest gains as usual.

Looking ahead, TI's management set third-quarter guidance ranges well below the current Street view. Analysts are looking for third-quarter earnings of $0.75 per share on roughly $3.5 billion in total revenues. Both of these figures are above the top end of TI's new guidance ranges, which center on $0.67 per share and $3.3 billion, respectively.

TI's stated aim is to return 100% of its free cash flows to shareholders in the form of dividends and share buybacks. In the second quarter, the company produced $695 million of free cash flows and then spent $354 million on dividend payments and another $654 million on buybacks. All told, the cash return ratio was 145% of the available free cash.

The markets shrugged and held fairly steady on this news, as Texas Instruments stock rose a modest 0.4%. TI shares closed 1.9% lower on Wednesday as a reaction to head-to-head rival Linear Technology released disappointing results on Tuesday night. Linear missed both sales and earnings targets and then followed up with low forward guidance as well. That stock closed 6.3% lower on Wednesday, sparking TI's pessimistic pre-earnings move.

The two companies agree that orders are slowing down in the coming quarter, but TI seems better equipped to handle a temporary downturn. Keep an eye on upcoming reports by Skyworks Solutionsand NXP Semiconductorsfor a fuller view of the trends that held Texas Instruments and Linear Technology back this quarter.

Both reports are due within a week, both stocks took a steep dive on Linear's report, and Skyworks recovered nearly all of Wednesday's 4% slump thanks to TI's market update. What these companies say tomorrow and next Wednesday, respectively, should shine new light on the earlier reports as well.

The article Texas Instruments Inc. Earnings: Could've Been Worse originally appeared on Fool.com.

Anders Bylund has no position in any stocks mentioned. The Motley Fool recommends Linear Technology and NXP Semiconductors. The Motley Fool owns shares of NXP Semiconductors and Skyworks Solutions. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.