Texas Instruments Inc. Earnings: Margins Shrink as Costs Rise, Profit Falls

S&P 500 (NYSE:SPY) component Texas Instruments Inc. (NYSE:TXN) reported its results for the fourth quarter. Texas Instruments designs and makes semiconductors that it sells to electronics designers and manufacturers all over the world.

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Texas Instruments Earnings Cheat Sheet for the Fourth Quarter.

Results: Net income for the semiconductor company fell to $298 million (25 cents per share) vs. $942 million (78 cents per share) a year earlier. This is a decline of 68.4% from the year earlier quarter.

Revenue: Fell 3% to $3.42 billion from the year earlier quarter.

Actual vs. Wall St. Expectations: TXN fell short of the mean analyst estimate of 39 cents per share. It beat the average revenue estimate of $3.25 billion.

Quoting Management: “Revenue in the fourth quarter was higher than expected across all our major product lines, reinforcing our belief that we’re at the bottom of this downturn. I’m pleased to say that despite the downturn and the lower factory utilization that came with it, cash flow from operations was strong and well above levels as compared with similar points in prior downturns. Our strategic focus on our core businesses and efficient investment in capacity are key to our strong generation of cash,” said Rich Templeton, chairman, president and chief executive officer. “As we move into 2012, we enter the final phase of our planned exit from the baseband market, and thus further tighten our focus on Analog, Embedded Processing and Wireless.”

Key Stats:

Gross margin shrank 7.8 percentage points to 45.3%. The contraction appeared to be driven by increased costs, which rose 13.1% from the year earlier quarter while revenue fell 3%.

The company has now seen net income fall in each of the last three quarters. In the third quarter, net income fell 30% from the year earlier, while the figure fell 12.6% in the second quarter.

The company fell short of forecasts after beating estimates in the previous two quarters. In the third quarter, it topped the mark by 3 cents, and in the second quarter, it was ahead by 3 cents.

Revenue has fallen for the past three quarters. In the third quarter, revenue declined 7.3% to $3.47 billion while the figure fell 1.1% in the second quarter from the year earlier.

Looking Forward: Over the past ninety days, the average estimate for the first quarter of the next fiscal year has fallen from 54 cents per share to 33 cents, indicating that analysts are growing pessisimistic about the company’s performance next quarter. The average estimate for the fiscal year is $2.03 per share, down from $2.25 ninety days ago.

Competitors to Watch: National Semicond. Corp. (NYSE:NSM), Analog Devices, Inc. (NYSE:ADI), Intersil Corporation (NASDAQ:ISIL), Linear Technology Corp. (NASDAQ:LLTC), ON Semiconductor Corp. (NASDAQ:ONNN), Intel Corporation (NASDAQ:INTC), STMicroelectronics N.V. (NYSE:STM), Maxim Integrated Products Inc. (NASDAQ:MXIM), Broadcom Corporation (NASDAQ:BRCM), and Marvell Tech. Group Ltd. (NASDAQ:MRVL).

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(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

To contact the reporter on this story: Derek Hoffman at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com