Inveterate semiconductor producer Texas Instruments (NASDAQ:TXN) reported second-quarter results on Tuesday evening. The company delivered on the promises of a recent preannouncement and followed up with muscular guidance for the next quarter.

TI's second quarter by the numbers

Metric

Q2 2018

Q2 2017

Year-Over-Year Change

Revenue

$4.02 billion

$3.69 billion

8.9%

Net income

$1.41 billion

$1.06 billion

33%

GAAP earnings per diluted share

$1.40

$1.03

36%

Data source: Texas Instruments.

The bottom-line figure includes a $33 million one-time tax benefit that wasn't part of TI's guidance calculations for the second quarter. Backing that item out, you'd get adjusted earnings of $1.37 per share.

Your average Wall Street analyst had expected earnings near $1.32 per share on approximately $3.97 billion in top-line revenues. TI exceeded these targets. In turn, those estimates were slightly ahead of the midpoints of TI's official guidance targets. On the bottom line, the company landed a penny above the top end of its guidance range.

The headline numbers are exactly what Texas Instruments said they would be in last week's preannouncement. Let's take a closer look at the moving parts behind these figures.

Nuts and bolts

The analog segment saw sales rising 12% year over year, driving operating profits 17% higher. Within that division, commodity chip sales decreased while power controllers and signal processors posted gains. As a result of the product mix shifting into a more profitable profile, analog operating margins rose from 44.6% to 47%.

TI told a similar story in the embedded processing department. Here, revenue climbed 9% higher and operating profit showed a 23% jump. Embedded operating margin stopped at 35.4%, up from 31.2% in the year-ago period. This was not a result of product mix, but of surging sales meeting a stable structure of fixed costs.

The "other" segment posted 7% lower revenues and 13% lower profits. Operating margins in TI's smallest division shrank from 31.9% to 29.9%. This unit couldn't match the year-ago period's strong shipments of custom ASICs (application-specific integrated circuits).

Overall, automotive and industrial customers provided solid order growth. The consumer electronics market was choppy and inconsistent with broad-based growth undermined by a handful of weak accounts -- business as usual, in other words.

A white-gloved hand holds up an upcut semiconductor wafer with a suction tool.

Image source: Getty Images.

What's next for Texas Instruments?

Looking ahead, TI expects third-quarter revenues to land near $4.3 billion for a 4% year-over-year boost. Earnings should stop in the neighborhood of $1.52 per share, up from $1.26 per share a year earlier. These targets are roughly in line with the current analyst view for the upcoming quarter, running a couple of pennies ahead on the bottom-line metric.

In the earnings call with analysts, management reiterated TI's commitment to the industrial and automotive markets, where they see a long-lasting opportunity to provide solutions with significant advantages over the competition.

"I'd describe our growth primarily coming from industrial and automotive as we look over the next decade," said vice president Dave Pahl. "So, that's where we've tried to increase spending. But we will shift spending around to take advantage of things like 5G."

Time to take a breather?

The strong results and equally solid guidance targets did not trigger a surge in TI's share prices. Then again, the company showed its hand on the top and bottom lines last week, so there wasn't much room for big surprises here.

Furthermore, TI's stock has delivered a 40% return over the last 52 weeks. Beating both the S&P 500 general market barometer's 14% gains and the Philadelphia Semiconductor Index's 22% surge, TI's growth seems to have been fully priced into its shares. Deep-discount value hounds may turn elsewhere, but TI remains a solid pick for most investors, thanks to the rare pairing of healthy growth with a generous 2.2% dividend yield.

Anders Bylund has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.