Texas Instruments Tumbles After Giving Weak Earnings Outlook

(Bloomberg) -- Texas Instruments Inc., a chipmaker that gets the bulk of its revenue from the industrial and automotive markets, gave a disappointing outlook for fourth-quarter earnings, sending its shares tumbling.

Profit will be $1.14 to $1.34 a share in the current period, the Dallas-based company said Tuesday in a statement. Revenue will be $3.6 billion to $3.9 billion. On average, analysts predicted earnings of $1.38 a share on sales of $4 billion, according to data compiled by Bloomberg.

Texas Instruments shares dropped as much as 7.2 percent in extended trading after the announcement. They had earlier closed at $100.25 in New York, leaving them down 4 percent for the year.

Investors use Texas Instruments’ earnings and predictions as an indicator of demand across the economy because it has the largest customer list and broadest product range in the $400-billion industry. The addition of electronic functions to industrial equipment and cars has driven a two-year expansion of revenue.

“Demand for our products slowed across most markets,” the company said.

Texas Instruments is making its second earnings announcement since reappointing Rich Templeton to the chief executive officer post following the ouster of Brian Crutcher due to an unspecified code-of-conduct violation. Templeton, who had previously held the job for more than 13 years, has taken the position permanently.

The world’s sixth-largest chipmaker reported a third-quarter net income of $1.57 billion, or $1.58 per share, compared with $1.29 billion, or $1.26 a share in the same period a year earlier. Revenue rose 3.5 percent to $4.26 billion. Analysts had estimated a profit of $1.53 a share on sales of $4.3 billion.

Analysts are concerned that a trade spat between the world’s two largest economies - the U.S. and China - may hurt overall demand. Amit Daryanani, of RBC Capital Markets, wrote in a note to clients that investors are focused on automotive demand and build-up of unused stockpiles following reports of a contracting end market for vehicles.

Texas Instruments’ analog chips perform the fundamental task of translating real-world inputs, like sounds and touch, into electronic signals. Unlike Intel Corp. and Qualcomm Inc., it doesn’t make chips that cost tens of millions of dollars to develop and then quickly become obsolete, making it less vulnerable to sudden swings in demand or competitive pressure.

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