Will This Upgrade Help Texas Instruments (TXN) Stock Today?

Story updated at 10 a.m. to reflect market activity.

NEW YORK (TheStreet) -- Texas Instruments (TXN) was upgraded to "neutral" from "reduce" by Nomura Friday.

Texas Intrsuments gained 0.5% to $45.47 in morning trading.

The firm raised its price target for the company $45 from $42. Nomura analysts Romit Shah, Sidney Ho, and Sanjay Chaurasia said Texas Instrument posted solid earnings, and that its margins have more upside potential.

"TI is showing more margin leverage than we had expected," the analysts wrote. "The company expects gross margin to improve about 300bps in Q2 on 10% qoq revenue growth, which implies incremental margins of 80-90%. A big part of that is the decline of under-utilization charges, but also mix and lower costs."

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Separately, TheStreet Ratings team rates TEXAS INSTRUMENTS INC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate TEXAS INSTRUMENTS INC (TXN) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, impressive record of earnings per share growth, compelling growth in net income and notable return on equity. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • TXN's revenue growth has slightly outpaced the industry average of 3.4%. Since the same quarter one year prior, revenues slightly increased by 3.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Powered by its strong earnings growth of 37.50% and other important driving factors, this stock has surged by 34.60% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, TXN should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • TEXAS INSTRUMENTS INC has improved earnings per share by 37.5% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, TEXAS INSTRUMENTS INC increased its bottom line by earning $1.92 versus $1.50 in the prior year. This year, the market expects an improvement in earnings ($2.31 versus $1.92).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Semiconductors & Semiconductor Equipment industry average. The net income increased by 34.5% when compared to the same quarter one year prior, rising from $362.00 million to $487.00 million.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, TEXAS INSTRUMENTS INC's return on equity exceeds that of both the industry average and the S&P 500.
  • You can view the full analysis from the report here: TXN Ratings Report

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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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