Shares of Texas Instruments (TXN 1.77%) opened Wednesday's trading 8.5% higher, boosted by a strong earnings report. The semiconductor veteran's stock settled down at a robust 5.9% gain as of 1:30 p.m. ET.
TI's Q1 report by the numbers
First-quarter earnings fell 35% year over year, landing at $1.20 per diluted share. Top-line sales trended 16% lower at $3.66 billion. But your average Wall Street analyst expected even deeper declines across the board, setting their consensus earnings target at $1.07 per share on roughly $3.61 billion of revenue.
Management's second-quarter guidance was right in line with the current Street views.
After the report, a plethora of analysts raised their target prices for Texas Instruments stock. Both the bulls and the bears stuck to their overall recommendations, just with consistently higher stock price targets.
The semiconductor business is returning to normal
Many of TI's customers are working through overstuffed chip inventories, resulting in slower sales of new product. The bottom-line surprise largely sprung from the sale of a property, adding $0.10 per share of unexpected profits. Without that item, TI's first-quarter business developed pretty much as expected.
However, earnings call comments showed some signs of normal seasonality -- a valuable upgrade from the below-average business trends TI saw over the last two years. Components for personal electronics was "the first market that went into the correction" in the inflation crisis, but it's also first one returning to ordinary seasonal sales patterns.
That insight added more value to TI's stock than the modest earnings surprise did. Business is getting back to normal, possibly ending a long period of macroeconomic stress and abnormal order trends. Meanwhile, TI's stock trades in a Goldilocks zone of reasonable pricing. It can be a solid buy if you want to lock in a robust 2.9% dividend yield -- well above a five-year average of 2.6%.
