Texas Instruments: Steady as She Grows? - TheStreet



) -- Investors are expecting sustained sequential earnings increases from

Texas Instruments

(TXN) - Get Report

when it releases fourth quarter results after the close on Monday.

On Dec. 8, Texas Instruments raised its fourth-quarter earnings outlook to 47 cents to 51 cents compared with the prior range of 42 cents to 50 cents. The company raised revenue guidance to $2.9 to $3.02 billion, compared with the prior range of $2.78 to $3.02 billion.

"As you might imagine, there are certainly multiple factors inside EPS that are at work," RonSlaymaker, Texas Instruments' vice president of investor relations said during a conference call. "Of course the higher revenue is a factor. In addition to that, expectations for higher factory utilization are playing out in Q4."

Slaymaker noted during the call that the fact that the EPS moved up a little better than the revenue range was reflective of gross margin. He also added that analog, from a product perspective, continues to lead Texas Instruments' growth, noting the strength in the company's analog profitability.

During the conference call, Slaymaker was reticent about commenting on first-quarter expectations, but did say that Texas Instruments' customers are ramping up their production.

"I would say, current quarter, that customer production ramp is probably the biggest factor in terms of what we're seeing," Slaymaker said. "Although there probably still is some impact from just converging our shipment levels with the customers' production levels."

Texas Instruments said previously that its operational constraints are really in the back-end of the company's operations -- more the assembly/test area as opposed to the wafer fabrication areas. The company added assembly/test capacity last quarter, and plans to continue adding capacity over the next couple of quarters.

Analysts surveyed by Thomson Reuters predict that Texas Instruments will earn 49 cents per share on revenue of $2.98 billion, an improvement from earnings of 21 cents per share -- minus restructuring charges -- on revenue of $2.49 billion in the fourth quarter of last year.

Texas Instruments was raised to buy from hold by Jefferies on January 12.

On Jan. 21, Texas Instruments declared a quarterly cash dividend of 12 cents per share of common stock, payable February 22, 2010. Previously, on Oct. 15, Texas Instruments also declared a quarterly cash dividend of 12 cents per share of common stock, which is an increase compared with the prior quarterly dividend of 11 cents per share.

A report by J.P. Morgan Securities, subsidiary of

JPMorgan Chase

(JPM) - Get Report

, published by Barron's writes that Texas Instruments' gross margins are close to a peak now and will have little to no gross-margin expansion after fourth-quarter 2009. Furthermore, the report writes that as Texas Instruments' wireless revenue declines, gross margins should be under pressure due to lower utilization rates.

J.P. Morgan is also concerned about an inventory correction during the first half of 2010 due to double-ordering in the fourth-quarter of 2009.

-- Reported by Andrea Tse in New York

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