What to Expect From Texas Instruments' Earnings

Next Monday, Texas Instruments (TXN 5.64%) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise.

As the maker of best calculators ever built, Texas Instruments holds a special place in the hearts of engineers, scientists, and financial analysts. But the company has gone well beyond simple calculating machines to build the semiconductor chips that have found their way into many of the most innovative and popular mobile devices in the tech market. Let's take an early look at what's been happening with Texas Instruments over the past quarter and what we're likely to see in its report.

Stats on Texas Instruments

Source: Yahoo! Finance.

Will Texas Instruments' earnings add up this quarter?
In recent months, analysts have gotten more guarded about TI's earnings prospects, pulling back on their estimates for the just-completed quarter by $0.04 per share and cutting $0.18 off their full-year 2013 earnings-per-share consensus. The stock hasn't suffered from those revisions, though, rising about 6% since mid-January.

Those analyst calls fly in the face of the optimism that Texas Instruments has expressed about the most recent quarter. Last month, the company narrowed its earnings and revenue ranges, essentially chopping off the bottom half of the expected results while keeping upper targets unchanged.

But the big unknown for TI investors is whether the company's aggressive strategy of moving away from the smartphone and tablet mobile-chip business in favor of its analog semiconductor and embedded processor segments will succeed. The move certainly plays to TI's strengths and avoids the massive competition taking place in the mobile-device arena, but it also requires a willingness to forego the growth opportunities that the mobile niche offers. Given the poor sales figures that TI has produced recently, it's hard to feel confident about TI's direction at this point.

Still, TI has some promising ideas for growth. General Electric (GE -2.11%) is seeking to develop an industrial Internet that would connect users with a wide variety of sensor-enabled products, ranging from big industrial machinery like train locomotives and aircraft to basic household appliances and other consumer goods. GE aims to profit from the data that the network would provide, but both TI and rival Broadcom (NASDAQ: BRCM) have built chips to allow devices to communicate via Wi-Fi. Given that Broadcom continues to emphasize its position within the mobile-device market, it may choose to cede the lower-potential opportunity from an Internet of things to TI.

In TI's quarterly report, watch for how the company's internal transition is progressing. TI's bold strategy won't produce immediate results, but you should get an initial sense of whether the company is moving in the right direction from this quarter's numbers.

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