Texas Instruments Earnings: On the Road to Recovery; Raising Fair Value to $185 From $175

Wide-moat Texas Instruments reported solid fourth-quarter results and provided investors with a decent revenue outlook for the March quarter, but a disappointing EPS forecast as the company anticipates gross margin deterioration due to underutilized factories. We raise our fair value estimate to $185 per share from $175, mostly due to the time value of money, offset by a modest reduction to our long-term revenue and profitability assumptions. We view the soft gross margin guidance as a bit of a near-term reckoning after several quarters of inventory buildups, but it doesn’t alter our long-term expectations. We view TI’s shares as fairly valued.