Analysts expect positive news in TI Q3 update

Largely based on broaden analog and embedded-processing product portfolios, financial analysts are anticipating an upbeat message from Texas Instruments Wednesday when the company is scheduled to update its Q3 outlook.

By Suzanne Deffree, Managing Editor, News -- Electronic News, 9/8/2009

Wall Street watchers are anticipating an upbeat message from Texas Instruments Inc Wednesday when the company is scheduled to update its Q3 outlook.

The company's previous guidance issued on July 20 forecast September quarter revenue of $2.5 billion to $2.8 billion. The projected improvement on Q2's $2.46 billion in revenue was issued as TI Chairman, President, and CEO Rich Templeton stated that TI was beginning to see healthy trends in profitability and would strengthening its core businesses of analog and embedded processing (EP).

Financial analysts this week are optimistic after an August TI analyst day where it seems the company's management made a positive impression.

"We left TI's analyst day (8/18) with a positive take-away, as it focused on efforts to broaden analog and EP product portfolios, which is partially supported by a vastly improved sales initiative that should lead to … greater cross-selling opportunities, and emphasized OMAP and connectivity growth through a competitive landscape," Doug Freedman, an analyst at Broadpoint AmTech, said in a research note this morning.

Freedman continued to state that Broadpoint AmTech believes TI’s September quarter is "benefiting from a mild broad-based recovery with sales tracking ahead of internal plan.

"Trends in the distributor channel are likely improving, with shipments reflecting end-market pull across most business segments (particularly analog, embedded, OMAP, and connectivity, and calculators)," he said.

As such, Broadpoint AmTech expects TI to revise the midpoint of its range higher to $2.7 billion to $2.85 billion, moving the estimate's midpoint up about 5%.

Revised Q3 revenue estimates are also expected by Barclays Capital, which this morning separately stated that it believes investors continue to be encouraged by TI's "early and aggressive focus on costs, strength of analog portfolio, restructuring, and suggestion of stabilizing demand."

The financial firm is currently modeling TI revenue of $2.65 billion, an 8% quarter-over-quarter increase, versus the Wall Street consensus of $2.67 billion, an 8.7% quarter-over-quarter increase.

"While TI's recent analyst day did not unveil any major new initiatives, following recent checks, we believe [management is] likely to tighten guidance to the upper end of prior +2 to +14% [quarter-over-quarter] range," Tim Luke, a semiconductor industry analyst with Barclays Capital, said in a research note today.

TI, like Intel Corp, is considered a bellwether for the tech industry. If TI does better its Q3 outlook as analysts expect, it will follow Intel in doing so. Intel in late August revised its September quarter guidance calling for Q3 revenue of $9 billion, plus or minus $200 million, as compared to the previous range of $8.5 billion, plus or minus $400 million. The improved guidance estimates a $1 billion sales gain on Intel's Q2 results.

TI's Q3 update will be Webcast on Wednesday, September 9, at 4pm central time. More information on the Webcast can be found here.