Texas Instrument Inc (NASDAQ: TXN) reported higher than expected quarterly revenues. The strong demand for its analog and embedded chip products from the automotive and industrial markets helped company reporting strong revenue growth. The company revenues of $3.41 billion as compared to $3.19 billion last year. Texas’ analog revenues grew 10% and that from Embedded Processing grew 6%, contributing to overall 7% rise in revenues. In other segment revenue declined 9% from a year ago due to royalties and custom ASCI products.  DLP products and calculators were even. The management mentioned that the demand in personal electronics market was down slightly from a year ago. The bottomline was at $1.05 billion higher than $0.84 billion reported in the corresponding quarter. The company reported EPS of $1.02 Vs $0.82. Street expectation was of 82 cents. The gross margin was at 62.5%.

For the year, the company reported revenues of $13.37 billion against $13 billion in 2015.  The gross profit was at $8.24 billion compared with $7.56 billion. For the year, the net profit was at $3.595 billion as against $2.986 billion. EPS for the year was at $3.48 higher than $2.82 in previous year. The cash flow from operations was $1.4 billion and free cash flow for the trailing 12-months period was $4.1 billion, up 6% from a year ago. Free cash flow margin was 30.5% of revenues, up 29.6% a year ago. The company returned $3.8 billion of cash to owners through a combination of dividends and stock repurchases.

Automotive industry played a major part

Apple Inc is Texas’ larger customer but the reported quarter saw the robust performance from automotive industry.  Analog segment has three products instead of four and are: Power, Signal Chain and High Volume Analog and Logic. Power contributes about 45% of Analog revenue, Signal chain is about 35% and High Volume and Logic contribute remaining 20%.  Embedded has tow product lines instead of three. Inside Embedded business, connected MCU contributes around 55% of embedded revenue and processor comprised the remaining 45%.

Industrial comprised 33% of revenues and registered growth of 2 points from 2015 while that from automotive was 18%, up 3 points. Personal electronics was 26%, down 4 points and communications equipment and enterprise systems were 13% and 6% respectively both were even to last year, while other was 4%.

What next

The company expects its Q1FY17 EPS in the range of 78-88 cents per share and revenues in the range of $3.17 billion – $3.43 billion. Zack has Rank # 3 (Hold) on the stock and consensus target price is $74.5.