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Texas Instruments (TXN)
Texas Instruments Issues Optimistic New Guidance
Optimism appears to be running rampant on Wall Street and now it has started to spill over into quarterly projections. Texas Instruments jumped on the bandwagon and issued some 2Q projections that pleased investors and boosted stocks. The company sharply raised its second-quarter guidance late on Monday. Texas Instruments now expects earnings of 14 cents to 22 cents a share on revenue of $2.3 billion to $2.5 billion. What caused the company to issue this well-received forecast? Will the company really be able to deliver these results?
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| Stock Analysis |
TI's core business revolves around the manufacturing of chips used in phones, televisions, digital cameras and calculators. Over the last year, the company along with a majority of its competitors watched the demand for these products dwindle. Consumers cut back on purchasing electronics such as new cell phones or new computers to pay for necessities. However, the last couple of months have revealed signs of a recovery in the chip sector. Investors are becoming more convinced that the market is actually stabilizing and will result in consumers purchasing items that require these chips. What exactly led to TI improving their second-quarter guidance? Increasing orders for analog chips were the biggest contributor to the company's improving performance. Manufacturers of notebook computers and mobile-phone equipment have become more optimistic about sales, so that has lead to TI receiving an increase in demand for its products. An analyst from JPMorgan Chase (JPM: Charts, News, Offers) said that a surge in orders from Nokia (NOK: Charts, News, Offers) has really helped boost demand for TI's offerings. Global sales from Asia have been some of biggest drivers of growth to the company.
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Can the company really deliver these results? That depends on a number of factors. The state of the economy will be the main factor determining if TI will be able to meet these projections. Many analysts have suggested that sustainable semiconductor growth will only come when the global economy recovers and consumers return to more normal purchasing patterns. Although consumer confidence continues to improve, people still remain cautious about purchases. If demand for TI's products continues to decline, the company will almost certainly fall short of its goal. During these uncertain times, only time can tell if company will be able to produce the results that they desire. It doesn't take much to send earnings in the wrong direction nowadays.
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As with most quarterly projections, investors will have to just wait and see if the company will be able to deliver. If the global economy continues to improve, TI should have no problem matching or possibly exceeding these projections. During morning trading, the news from TI boosted Wall Street and drove stocks higher. The company's shares rose 81 cents, or 4 percent, to $20.58 in after-hours trading on Monday.
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Profile |
Click here to view a detailed profile of Texas Instruments.
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