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Earnings Results: Texas Instruments stock drops as China’s COVID restrictions prompt cautious outlook

Texas Instruments Inc. shares dropped in the extended session Tuesday after the chip maker blamed COVID-19 restrictions in China for an outlook that fell below Wall Street expectations.

Texas Instruments
TXN,
-3.15%

shares fell as much as 7% in after-hours trading, following a 3.2% decline to close the regular session at $168.44.

The company said it expects second-quarter earnings of $1.84 to $2.26 a share on revenue of $4.2 billion to $4.8 billion, while analysts surveyed by FactSet, on average, had forecast earnings of $2.27 a share on revenue of $4.94 billion.

“This outlook comprehends an impact due to reduced demand from COVID-19 restrictions in China,” said Rich Templeton, Texas Instruments chairman and chief executive, in a statement.  

The company posted first-quarter net income of $2.2 billion, or $2.35 a share, compared with $1.75 billion, or $1.87 a share, in the year-ago period. The company said earnings included a 2-cent-per-share benefit that had not figured into its original guidance.

Revenue rose to $4.91 billion from $4.29 billion in the year-ago quarter “primarily due to growth in industrial and automotive,” the company said.

Last earnings call, executives had said they were placing more emphasis on serving industrial and automotive customers, which have accounted for the hardest-hit end markets during the global chip shortage.

Analysts had forecast earnings of $2.18 a share on revenue of $4.74 billion, based on the company’s outlook of $2.01 to $2.29 a share on revenue of $4.5 billion to $4.9 billion.

Sales of analog electronics, which convert real-world data such as sound or temperature into digital data, rose 16% to $3.82 billion from the year-ago period, while analysts had forecast $3.7 billion. Sales of embedded processors, which take that digital data and use it to perform specific tasks, increased 2% to $782 million, with analysts expecting $770.1 million.

Read: Why semiconductor stocks are ‘almost uninvestable’ despite record earnings amid a global shortage

The company’s earnings report comes just two days before its annual stockholder meeting.

Over the past 12 months, Texas Instruments’ stock price has declined 12%. In comparison, the S&P 500 index 
SPX,
-2.81%

 has slipped 0.3 %, the tech-heavy Nasdaq Composite Index 
COMP,
-3.95%

 has fallen 11.7%, while the PHLX Semiconductor Index 
SOX,
-4.38%

 has dropped 14.6% over that time.

Other chip-sector companies reporting this week include Qualcomm Inc.
QCOM,
-2.24%

on Wednesday, along with Intel Corp.
INTC,
-3.27%

and KLA Corp.
KLAC,
-4.97%

on Thursday.

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