Bull of the Day: Texas Instruments (TXN)

Can anything stop the semiconductor industry?

The high-flying industry segment has come roaring back in recent years thanks to rising demand, and a vast new world of interconnected devices better known as the Internet of Things. And with other growing semiconductor avenues—such as in cars, robots, and a variety of sensors—taking off in the coming months and years, the future is pretty bright for this market.

With this impressive backdrop, investors have a multitude of choices at their disposal. One that is worth a closer look in particular though, is Texas Instruments (TXN Free Report) as it is arguably a great blend of safety and growth for investors seeking a play in the semiconductor market.

Why TXN?

Texas Instruments is a Dallas-based manufacturer of semiconductors with a big focus on analog chips and embedded processors. And while TXN has a diverse lineup of products right now, the company is well-prepared for the future of semiconductors too. It has a wide-ranging set of offerings that can find their way into a number of Internet of Things devices, which includes providing solutions for wireless connectivity, microcontrollers, and sensors as well.

This great lineup of products and a surging market environment are really paying off for TXN investors as of late. The company recently beat estimates—yet again—and has posted an average earnings surprise of about 7.1% in the past four quarters, while it showed nice results in terms of margins, and year-over-year growth for some of its key divisions in its latest report.

The guidance was the real star of the latest release though, as the company put out fresh projections which came in ahead of the Zacks Consensus Estimate for the coming quarter. This, and the strong industry trend almost across the board, has pushed analysts covering the company to raise estimates for nearly all the periods that we study.

For the current quarter, estimates have surged by about 10% in the past sixty days, while the full year estimate has moved higher by about 6.7% in the same time period, and the following year has put up an increase of a similar amount as well. But best of all, the agreement among analysts is basically universal. For the full year, 14 estimates have gone higher compared to zero lower, while the current quarter and next quarter also see double digit disparities between those revising their estimates higher, and those moving estimates lower.

The good news doesn’t stop there for Texas Instruments though, as the company also has an impressive growth grade of ‘B’, due to its industry-beating margins, ROE, and current cash flow growth. Add in a top 5% industry rank and a 2.5% dividend yield, and it is easy to see why this stock was just upgraded to a Zacks Rank #1 (Strong Buy), and why it needs to be on investors’ radars now.

Bottom Line

The semiconductor market is hot, but you don’t need to look to some small or micro cap company to find a firm that is poised to benefit from a great trend in this industry. Investors can do just fine by looking at large caps that have great track records in earnings season, rising earnings estimates, and solid product portfolios.

Texas Instruments definitely fits that bill, and it is a solid dividend payer to boot. So, if you are looking for a top-notch semiconductor pick that is a player in the semiconductor world today and is well-positioned to benefit from tomorrow too, look no further than TXN.

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