Texas Instruments prepares for coronavirus crisis after strong first quarter

By Munsif Vengattil and Stephen Nellis

(Reuters) – Texas Instruments Inc <TXN.O> on Tuesday reported better-than-expected results for the first quarter but forecast current-quarter revenue and profit largely below Wall Street estimates, as the chip industry braces for a big hit from the coronavirus outbreak.

As TI supplies chips for everything from smart phones to automobiles and often reports earnings before other chipmakers, investors watch its results closely as a proxy for both the health of the chip industry and other sectors where semiconductors are key components.

Despite the forecast, investors buoyed TI’s shares in extended trading with a 2% rise, in part because some aspects of its business such as analog chips appeared to be little hurt by the coronavirus while the company maintained focus on staying profitable and returning dividends to shareholders.

The company said it was prepared for the disruptions caused by the pandemic due to strong inventory, but faces demand uncertainty.

“I think customers are just still processing through what their customers are telling them and we will see that play through,” Chief Executive Officer Rich Templeton said.

Templeton, who made his first appearance on the earnings call in a break to tradition to assure investors, said he does not expect any long-term structural changes in the chip industry due to the pandemic.

A host of chipmakers have either cut or pulled their sales outlook because of supply disruptions caused by the global pandemic.

Supply chain disruptions increased customer concerns about being able to secure supply, leading to a demand upswing in early March from most markets, TI said.

In the United States, chipmakers are considered essential businesses and allowed to operate. But with no uniform global definition of “essential,” industry executives say their delicate supply chains have hit snags as lockdowns played out differently in different countries.

“With a COVID-19 recession likely upon us, and with reduced visibility of customer demand, we are using the 2008 financial crisis to model our second-quarter outlook,” Templeton said in a statement.

TI forecast second-quarter earnings of 64 cents per share to $1.04 per share, on revenue of between $2.61 billion and $3.19 billion.

Analysts were expecting earnings of 99 cents per share on revenue of $3.15 billion, according to IBES data from Refinitiv.

On a per-share basis, the company earned $1.24 in the first quarter, beating expectations of $1. Revenue fell 7% to $3.33 billion, but beat estimates of $3.17 billion.

(Reporting by Munsif Vengattil and Supantha Mukherjee in Bengaluru, Stephen Nellis in San Francisco; Editing by Devika Syamnath and Maju Samuel)

tagreuters.com2020binary_LYNXNPEG3K236-BASEIMAGE