UPDATE: FBR Capital Markets Upgrades Texas Instruments to Market Perform, Raises PT Following In-Line 3Q13 Results, Disappointing 4Q13 Guidance

In a report published Tuesday, FBR Capital Markets analyst Christopher Rolland upgraded the rating on Texas Instruments TXN from Underperform to Market Perform, and raised the price target from $36.00 to $38.00. In the report, FBR Capital Markets noted, “On Monday evening, October 21, Texas Instruments (TXN) reported in-line 3Q13 results but offered disappointing 4Q13 guidance. While both analog (+11% QOQ) and embedded processing (+8% QOQ) powered higher in 3Q13, overall revenues are expected to fall –8% in 4Q13 as management blamed the shortfall on seasonality. While this may be partially explained by historical data (4Q has been down –4.5% QOQ since 2002, although the variance is extremely large), we believe the soft guidance is also a consequence of a natural deceleration in the cyclical recovery. Highlighted by our Asian checks this quarter, this slowdown may also be attributed to softer results at Linear Technologies and Fairchild Semiconductor. While weaker 4Q13 guidance is somewhat unsettling, we do not believe it is indicative of a cyclical top, and therefore given after-hours weakness in shares of TXN, we are taking the opportunity to upgrade our rating to Market Perform. Admittedly, we had underestimated the FCF generation of the company, now highlighted by the large discrepancy between depreciation and capex.” Texas Instruments closed on Monday at $40.99.