As financial analysts had anticipated, Texas Instruments Inc raised and narrowed its expected ranges for revenue and EPS (earnings per share) in a scheduled update Wednesday afternoon.

The company projected revenue of $2.73 billion to $2.87 billion, compared with the prior range of $2.5 billion to $2.8 billion. The improved revenue guidance estimates a Q2 revenue increase of about 11% to 17% quarter-over-quarter, better than the prior guidance's expected increase of about 2% to 14% quarter-over-quarter.

New EPS expectations of $0.37 to $0.41 compared with the prior range of $0.29 to $0.39.

TI noted better-than-expected quarterly bookings and shipments thanks to stronger-than-expected demand pull across multiple end markets and geographies. The company also noted a changed inventory situation, which now sees customers no longer with burn inventory.

Although the raised and narrowed guidance was expected, analysts were none the less pleased by TI's announcement.

"While an upward revision has been widely expected given recent trends across analog and the gross margin guide is largely unchanged despite the higher sales, the update is likely viewed as solid with inventory levels to be flat to lower vs flat," Tim Luke, a semiconductor industry analyst at Barclays Capital, said in a research note this morning.

Doug Freedman, an analyst at FBR Capital Markets, seconded Luke's inventory perspective based on statements from TI executives made during the Webcasted update.

"Management's commentary suggests that the demand picture is meaningfully improving across end markets and geographies (including improvements in Europe and in industrial and automotive shipments) and that supply conditions are also very favorable for chip suppliers on a go-forward basis," Freedman said. "Importantly, management said distribution inventory dollars are largely holding steady in 3Q, while distribution days of inventory fall 'dramatically.'"

Freedman also noted that TI management said lead times are stretching out for some products and that chip prices are increasing for some commodity products. "These dynamics suggest some future chip replenishment is likely at distribution and potentially at some OEMs, in our view," he said. "We believe TI's report is another "all clear" signal to buy any dips in semiconductor stocks and maintain or increase existing semiconductor exposure levels as future earnings estimates should continue to rise, margins should benefit from price hikes and higher utilizations, and valuations still look reasonable (partially due to dramatic cost reductions)."

Still, while positive on Q3, Luke warned that TI and other semiconductor industry companies may face some challenges in Q4.

"As with others, lead times moving out," Luke said. "While impressed by execution on costs with further Q3 upside likely, recognize Q4 likely flattish with Q1 2010 seasonally lower suggesting catalysts may be more limited going forward."

TI's upwardly revised guidance follows similar action from Intel. Intel in late August bettered its September quarter guidance to call for Q3 revenue of $9 billion, plus or minus $200 million, as compared to the previous range of $8.5 billion, plus or minus $400 million. The improved guidance estimates a $1 billion sales gain on Intel's Q2 results.

By: DocMemory
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