Wall Street Has High Hopes for TI's Mid-Quarter Update

Analysts expect good news from chip maker Texas Instruments (NYSE: TXN) Wednesday, when the company is scheduled to give a mid-quarter financial update.

An upbeat report from TI, which makes chips for everything from cellphones to automobiles, would be another good sign for an industry that was hard hit by the recession earlier this year.

Intel Cheer

Chip bellwether Intel (Nasdaq: INTC) raised its third-quarter sales forecast late last month, signaling improving conditions for computer makers. The Semiconductor Industry Association, a trade group, said last week that July marked the fifth straight month of improving chip sales worldwide.

"We believe that TI's September quarter is benefiting from a mild broad-based recovery," said Broadpoint AmTech analyst Doug Freedman, who has a "buy" rating on the stock.

Analysts say orders are improving and factories are working closer to capacity, meaning better profit margins.

By the Numbers

Patrick Wang, of Wedbush Morgan, raised his forecast for the quarter on Tuesday based on improving margins and a growing market share. He now expects TI to earn 37 cents per share on sales of US$2.7 billion. That's up from a previous estimate of 36 cents per share on $2.65 billion and above the average projection of 35 cents per share on $2.67 billion, according to Thomson Reuters. Wang rates the company "outperform."

Pacific Crest analyst Michael McConnell said his checks show TI's so-called "book-to-bill" ratio is above 1, meaning the company has more orders than it can immediately fill.

He said sales are improving based on demand for personal computers, smartphones and liquid crystal display panels.

Morgan Stanley sounded a cautious note on the stock Tuesday, however. Analyst Mark Lipacis cut the company's rating to "equal-weight" from "overweight," saying investors have already "baked-in" an improving forecast.

Shares of Dallas-based TI were up 11 cents at $24.97 in late trading, but the stock has rallied 60 percent since the beginning of the year.

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© 2009 ECT News Network. All rights reserved.