Analysts had been expecting earnings near $0.69 per share on roughly $3.3 billion of revenue. As it turns out, they absolutely nailed the sales target, but Texas Instruments crushed their earnings projections with net income of $0.76 per share.
Looking ahead, the semiconductor veteran offered guidance centered on $3.2 billion in first-quarter sales, yielding roughly $0.62 of earnings per share. That's right in line with analyst projections for the quarter.
So far, so good -- a solid earnings surprise followed by a pretty decent next-quarter outlook. So why didn't Texas Instruments shares soar on this news, settling just a few pennies above Monday's closing price in after-hours trading?
That's because the results included $0.07 per share of one-time earnings, which were not known when Texas Instruments issued its quarterly guidance three months ago. We're looking at a $0.05 benefit per share from the reinstatement of the federal research tax credit, as well as a $0.02 bottom-line gain per share from a modest asset sale.
So if you back these unexpected and frankly unplanned gains out, you get right back to the original guidance range and the resulting analyst consensus. No surprises here. Move along, move along.
Listening to TI's earnings call, that's exactly the takeaway that management wanted you to absorb. In the words of CFO Kevin March: "It's more steady-as-she-goes, as we have seen in the last few years. The economy is just kind of growing well on a steady basis, and we're trying to take advantage and grow a little faster than that."
To help move things along, Texas Instruments has adopted a new inventory management model. Rather than depending on an extensive network of resellers and distributors, TI is moving to an on-demand or consignment process, where the final customer orders chips directly from TI instead.
This is not a dramatic process, but a gentle transition. TI's inventory levels have increased by just 6% over the past two years, though half of that increase fell in the latest quarter. Management says that this change will help TI react faster to sudden changes in the marketplace, which have often left the company flat-footed in recent years.
Adjusted earnings per share rose 50% year over year on 8% higher revenue, driving home an 18% full-year boost of TI's free cash flows.
Analog chip sales increased 13% year over year, but operating profits for that segment jumped 50% higher, resting on strong demand for power management products. In the embedded processing segment, sales rose 12% and profits more than doubled, thanks to well-received products in microcontrollers, embedded processors, and -- of course -- connectivity. As a reminder, the Internet of Things is sort of a synonym for embedded processing and connectivity right now, so Texas Instruments is leading the charge in a red-hot market here.
So, yeah. Save for the interesting distribution model switch and another reminder of TI's connection to the Internet of Things, there really wasn't much to see here. There certainly weren't any dramatic revelations that should change your investment thesis (or lack thereof) one way or the other.
Steady as she goes, indeed. Add Texas Instruments to your Foolish watchlist to keep an eye out for bigger news about this company and stock.