Texas Instruments Inc. Plunges on Soft Earnings and Awful Guidance

By Markets Fool.com

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Texas Instruments CEO and chairman Rich Templeton. Image source: Texas Instruments.

Semiconductor powerhouse Texas Instruments just reported results for the first quarter of fiscal year 2015. The results fell just short of Wall Street's consensus estimates, but the official outlook for the next quarter was very weak. In early after-hours trading, TI shares fell as much as 7.2% on this nerve-rattling report.

For the first quarter, analysts were expecting earnings of $0.61 per share on roughly $3.2 billion in sales. Texas Instruments delivered 6% year-over-year sales growth to land at $3.15 billion, lifting earnings by 39% to $0.61 per share. Again, these figures were mere rounding errors below the Street view.

The official guidance for the second quarter told a more spine-tingling story. Here, the current Street consensus points to earnings near $0.73 per share on approximately $3.4 billion in total sales. The midpoint of TI's guidance ranges sit at $0.65 per share and $4.25 billion, respectively. That's more of a drastic miss.

"Our estimates assume continuing weakness in our communications equipment and personal electronics markets, particularly for wireless infrastructure equipment and PCs, respectively," explained TI chairman and CEO Rich Templeton in a prepared statement. "We also do not expect a near-term rebound in foreign currency exchange rates."

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In other words, Templeton paints all of these disappointments with a broadly economic brush, pinning some of it on shifting consumer behaviors and the rest on currency exchange problems.

Templeton underscored an unbroken seven-quarter streak of year-over-year growth in the important analog products division, alongside a 10-quarter growth streak in the equally crucial embedded processing segment. Gross margins rose by 4 percentage points, continuing another good-looking long-term trend:

TXN Gross Profit Margin (Quarterly) Chart

TXN Gross Profit Margin (Quarterly) data by YCharts.

So Texas Instruments is holding its own in many ways while battling several negative trends outside its direct control.

Moreover, the stock headed into this report with plenty of momentum. Even if the drastic after-hours price drop holds overnight, TI investors will still have enjoyed a market-beating 17% gain over the past six months. Don't cry for Texas Instruments, in other words -- but do take this report as a stern warning about shifting sands in the global technology markets.

The article Texas Instruments Inc. Plunges on Soft Earnings and Awful Guidance originally appeared on Fool.com.

Anders Bylund has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.