Hot stock to watch: Texas Instruments Incorporated (NASDAQ: TXN)

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Texas Instruments Incorporated (NASDAQ: TXN) stock rose over 3% on 22nd April, 2020 (as of 1:46 pm GMT-4; Source: Google finance) after the company’s first-quarter net income fell to $1.17 billion from $1.22 billion, from a year earlier. The company has posted better than expected results for the first quarter of FY 20. The company has generated the cash flow from operations of $6.4 billion for the trailing 12 months again on the back of the strength of the business model. Free cash flow for the same period was $5.6 billion and 40% of revenue. This reflects the quality of the product portfolio, as well as the efficiency of the manufacturing strategy, including the benefit of 300-millimeter Analog production.

In the core businesses, Analog revenue had fallen 2% and Embedded Processing had fallen 18% from the same quarter a year ago. Analog’s ( that includes Power, Signal Chain and High Volume) revenue fell due to Signal Chain and High Volume, which is offset by growth in Power. The segment’s operating profit decreased mainly due to lower revenue and associated gross profit. C;n Processing’s (that includes Connected Microcontrollers and Processors) revenue deed in both product lines and the segment operating profit declined due to lower revenue and associated gross profit. Other’s (that includes DLP products, calculators and custom ASIC products) revenue fell $64 million, and operating profit declined $5 million.

TXN in the first quarter of FY 20 has reported the adjusted earnings per share of $1.24, while reported 7 percent fall in the adjusted revenue to $3.33 billion in the first quarter of FY 20. The company has returned $6.6 billion to owners in the past 12 months through stock repurchases and dividends. Over the same period, the dividends represented 55% of free cash flow, underscoring their sustainability.

Texas Instruments expects second-quarter earnings to be in the range 64 cents to $1.04 a share, on revenue expected to be in the range of $2.61 billion to $3.19 billion. On average, the analysts predicted profit to be of 93 cents and sales to be of $3.1 billion. The earnings projection includes an estimated $10 million discrete tax benefit. The company expects the annual operating tax rate to be about 14% in 2020.

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