Texas Instruments (TXN.O) predicted lower-than-expected revenue and profit for the fourth quarter, citing reduced production due to deteriorating demand in its vital industrial sector. After the announcement, the company, headquartered in Dallas, Texas, experienced a 4.5% drop in its stock price during after-hours trading.
In the third quarter, sales in the industrial sector, which accounts for the majority of Texas Instruments’ revenue, saw a mid-teens percentage decline in all regions except Japan, according to Dave Pahl, TI’s head of investor relations. He noted that despite the expectation of a significant rebound as China emerged from the pandemic, such a recovery has not materialized.
For the current quarter, the company estimated revenue between $3.93 billion and $4.27 billion, falling short of analysts’ average projections of $4.49 billion (as per LSEG data). The profit per share was expected to be between $1.35 and $1.57, below the anticipated $1.76 per share. This adjustment was due to the reduction of factory activity in the third quarter to lower inventory levels and safeguard gross margins, signaling an expectation of further demand decline and sustained weakness for at least the next couple of quarters, according to Edward Jones analyst Logan Purk.
In the three months ending in September, revenue decreased in all segments except for automotive, which saw a 20% increase in sales. Despite concerns raised by most analysts about broader weaknesses in the automotive market and the impact of the United Auto Workers strike, TI’s executives stated that they did not foresee any shifts in demand trends within the automotive sector.
Summit Insights Group analyst Kinngai Chan believed that the reason for the lackluster forecast was softening orders not only in the industrial market but also in the automotive market. Despite the lower-than-expected performance, Texas Instruments reported revenue of $4.53 billion, slightly below estimates of $4.58 billion, and earnings per share of $1.85, exceeding expectations.