TEXAS INSTRUMENTS INC. $54(Nasdaq symbol TXN; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 1.05 billion; Market cap: $56.7 billion; Priceto- sales ratio: 4.7; Dividend yield: 2.5%; TSINetwork Rating: Average; www.ti.com) specializes in analog chips, which convert inputs like touch, sound and pressure into electronic signals computers can understand.
Manufacturers use these chips in a variety of products, including cars, cameras, medical devices and appliances.
The company’s earnings jumped 30.5% in 2014, to $2.8 billion from $2.2 billion in 2013. Texas Instruments spent $2.8 billion on share buybacks during the year. As a result, earnings per share gained 34.6%, to $2.57 from $1.91.
Revenue rose 6.9%, to $13.0 billion from $12.2 billion. Strong demand for analog and embedded processor chips (which perform mathematical calculations) offset lower sales of other chips and handheld calculators.
The company stopped making digital chips for mobile phones in 2013, due to intense competition from larger chipmakers like Intel (see page 14). As a result, its research costs fell 10.8%, to $1.4 billion (or 10.4% of revenue) in 2014 from $1.5 billion (or 12.5% of revenue) in 2013.
Thanks to its rising revenue and improving efficiency, the company’s gross profit margin (gross profits as a percentage of revenue) rose to 56.9% from 52.1%.
The company’s earnings will probably improve by 12.1%, to $2.91 a share, in 2015, and the stock trades at a reasonable 18.6 times that estimate. The $1.36 dividend yields 2.5%.
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