Texas Instruments Inc. said it is emerging from an inventory glut and expects stronger growth in the coming months due to rebounding demand for its chips, which are used in a variety of electronic gadgets such as cell phones.
The upbeat prediction came as Texas Instruments handily beat Wall Street’s earnings estimates despite a 12 percent drop in first-quarter earnings. Its shares surged on the report, released Monday after the markets closed.
The Dallas-based company said it earned $516 million, or 35 cents per share, in the most recent quarter, compared with $585 million, or 36 cents per share, a year earlier. Revenue fell to $3.19 billion from $3.33 billion a year ago.
Analysts had expected 31 cents per share profit on sales of $3.15 billion for the January-March quarter, according to a survey by Thomson Financial.
Ron Slaymaker, the company’s vice president of investor relations, said the problems of the past several quarters were ending because of lower inventory levels among its customers, which includes handset maker Motorola Inc., and rebounding demand for chips in a variety of new electronic gadgets.
“We think the issue that has been a drag for us on our earnings is now behind us,” Slaymaker said.
The company predicted second quarter revenue would range from $3.32 billion to $3.60 billion on earnings of 39 to 45 cents per share. It plans to release a mid-quarter update June 11.
Analysts were pleased with the performance.
“They have executed their way through this downturn,” said Cody Acree, an analyst with Stifel Nicolaus & Co., who recently upgraded TI’s stock to a “buy” rating. “The only thing that matters is, are they better then people expected, and they definitely are.”
It was a far cry from the fourth quarter, when TI executives said earnings had been affected by a shift in the wireless market, in which growth is faster for lower-end phones with less-expensive chips.
Slaymaker said that trend was again shifting and demand was rising from customers who want chips in higher-end handsets.
“The surprise is how profitable the company is,” said analyst David Wu at Global Crown Capital. “I think it’s a much more profitable company than it used to be.”
Slaymaker said the company’s previously announced plans to stop production at a chip fabrication plant in Dallas were still on track to happen by the end of the year as part of a streamlining move announced in January to cut costs.