Year to date, shares of Texas Instruments (TXN) are up almost 27%, yet you never hear anything about the company. Texas Instruments is a quality semiconductor holding.
Two weeks ago, Texas Instruments reported third-quarter fiscal 2016 earnings of 94 cents per share, 8 cents better than the consensus estimate. Earnings per share were up 24%. Revenue rose 7.2% to $3.67 billion, vs. the $3.48 billion consensus.
Demand for automotive semiconductors (up 10%) and a firmer industrial market led the way. Revenue rose 10% in the embedded processing group, and analog revenue grew 6%.
Texas Instruments is a big parts supplier to Samsung (SSNLF) , but the recall of the Note 7 didn't seem to have an effect on the results.
The company ended the quarter with a 62% gross margin, up 380 basis points. Gross margin is being driven by the move away from 200 mm wafers towards 300 mm wafers. The larger wafers reduce the company's manufacturing costs by nearly 40%. Gross margins should continue to rise over the next two or three years as the company switches over all of its production to 300 mm. At the end of last year, Texas Instruments had $6 billion of open 300 mm capacity.
Cash flow from operations was $1.4 billion. Free cash flow for the trailing 12 months was $3.9 billion, up 8% from the year-ago period. Free cash flow margin was 29.5%, up from 27.5% a year ago. Texas Instruments has said that strong free cash flow is important to maximizing shareholder value.