Can Texas Instruments (TXN) Surprise This Earnings Season? - Analyst Blog

Texas Instruments TXN, or "TI”, is set to report first-quarter 2014 results on Apr 23. Last quarter, it posted a 4.3% positive surprise. Let's see how things are shaping up for this announcement.

Growth Factors this Past Quarter

TI's fourth-quarter earnings exceeded the Zacks Consensus Estimate driven by an improving mix of business and good cost control. However, revenues were down 6.7% sequentially but up 1.6% year over year. Distributor resales also dropped 3% sequentially, reflecting the decline in revenues.

TI's gross margin of 54.2% was down 68 basis points (bps) sequentially but up 565 bps from the year-ago quarter. Lower volumes led to the sequential decline.

For the first quarter of 2014, TI expects revenues around $2.30–$3.07 billion. The earnings per share are expected in the range of 36–44 cents, the mid-point being a cent lower than the Zacks Consensus Estimate of 41 cents.

Earnings Whispers?

Our proven model does not conclusively show that Texas Instruments will beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP:  Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 41 cents. Hence, the difference is 0.00%.

Zacks Rank: TI's Zacks Rank #3 (Hold) when combined with a 0.00% ESP makes surprise prediction difficult.

We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

You could consider other stocks with a positive earnings ESP and Zacks Rank #1, 2 or 3 such as:

Westlake Chemical Corp. WLK, with Earnings ESP of +1.77% and a Zacks Rank #1 (Strong Buy).

Helmerich & Payne, Inc. HP, with Earnings ESP of +0.68% and a Zacks Rank #1.

Lincoln Electric Holdings Inc. LECO, with Earnings ESP of +1.11% and a Zacks Rank #1.