Texas Instruments (TXN, Financial) concluded FY24 with disappointing results, leading to a 6% drop in stock price. While the company exceeded Q4 earnings and revenue expectations, its Q1 earnings guidance fell short of analyst projections. The primary issue remains the struggling industrial market, which accounts for about 40% of annual revenue. This sector has seen a decline in revenue for three consecutive quarters and hasn't experienced growth since early 2022.
TXN reported a year-over-year decline in both earnings and sales due to ongoing industrial weakness. EPS was $1.28, a 12.3% decrease, while revenue was $4.01 billion, down 1.7%. Sequentially, revenue fell 3.4%, impacted by both the industrial and automotive markets, which together represent 70% of TXN's annual revenue.
The automotive market saw a 5% sequential decline in Q4, following a 7-8% increase in Q3. China showed relative strength, driven by healthy electric vehicle adoption. However, demand softness was noted in regions outside China, including Europe, the U.S., and Japan. Growth in China was less pronounced in Q4 compared to Q3.
Despite China's economic challenges, TXN's business there performed well, with revenues growing by a mid-teens percentage sequentially, supported by automotive and personal electronics demand. However, industrial growth in China remains elusive.
Personal electronics and communication equipment showed positive momentum, with mid-single-digit and high-single-digit sequential revenue improvements, respectively. Personal electronics posted growth despite Q1 typically being a quiet quarter, building on a 30% sequential increase in Q3. Communication equipment continued to trend upward after a 25% rise in Q3.
Due to persistent challenges in industrial and automotive sectors, TXN's Q1 projections are underwhelming, with expected EPS of $0.94-1.16 and revenues of $3.74-4.06 billion, indicating another 2-3% sequential decline at the midpoint. Management noted that most industrial sectors are at or near the bottom, but some, particularly industrial automation and energy infrastructure, are still declining.
TXN's Q4 report reflects similar trends as the previous quarter, with non-industrial markets performing reasonably well. Automotive turned negative in Q4, as expected, with lingering weaknesses outside China. Unlike last quarter's optimistic response despite soft guidance, investors are now more cautious about a potentially prolonged recovery in TXN's largest market, causing some concern.