Texas Instruments (TXN) Stock Analysis: Wait for a Better Price

Charts below for revenue and profit margin of Texas Instruments demonstrate that the Company did not perform well over the past couple quarters: 

 12/31/1912/31/1812/31/17
Revenue YoY-9%6%12%
Gross profit margin YoY-11%7%17%

 12/31/199/30/196/30/193/31/19
Revenue growth QoQ-11%3%2%-3%
Gross profit margin QoQ-3%1%2%-3%
Net income1,070,0001,425,0001,305,0001,217,000

Due to the lack of growth, when it comes to price analysis for Texas Instruments, there should be few or no premiums based on its prior operation and price performance.

Trailing twelve months EPS = $1.12+1.49+1.36+1.26=$5.23

PE range within prior 1 year: 18.94~25.67

Reasonable Stock Price Before Next Earning Release based on P/E during the past one year: $99.06 ~ $134.25

Current price for TXN is around $132, so if you are interested in buying this stock, it’d better wait for a better price.


Coca-Cola Co (KO) and PepsiCo, Inc. (PEP) Q1 2019 Earnings Report Outlook

The Coca-Cola Co (KO) and PepsiCo, Inc. (PEP) both announced 2019 first quarter earning reports recently. Let’s take a quick look about the performance of these two soft drink companies in the first quarter.

1.PEP price went up

To be honest, PEP share price has risen a lot during the past year and its diversified products brought good revenue performance. On the contrary, KO share price had limited upward movement during the last 12 months. Actually Coca-Cola’s Q1 2019 financial result was very nice, even better than Pepsi’s numbers, in terms of income growth rate, operating profit growth rate, EPS growth rate, operating profit margin, and profit margin.

2.Organic revenue growth rate

However, after the earnings report, PEP shares were more favored by investors, mainly because Pepsi’s organic revenue had a strong 5% growth, better than estimate. Investors should be aware that the so-called Organic Revenue is a non-GAAP metric. GAAP, Generally Accepted Accounting Principles, are accounting principles accepted by SEC (US Securities and Exchange Commission regulations). GAAP provides guidance about how revenue, expense and other expenses should be recognized. Although non-GAAP metric can be misleading sometime while it is an indicator that the company believes that it can reflect the company’s operation more accurately. Both Coca-Cola and PepsiCo announced their organic revenue, but the methodology used could be different. Therefore, comparing the company’s current period organic revenue and prior period one will be more appropriate than looking the organic revenue itself as long as the company did not change its calculation methodology between periods.

3.Share repurchase

During the past quarter, Pepsi bought back $3 billion of treasury stocks, while Coca-Cola bought back only $243 millions of its stock. This could be one of the reasons made Pepsi’s share price rose as its number of outstanding shares decreased. I don’t think we should overinterpret the motivation for Pepsi to repurchase its stocks. PepsiCo described $3 billion in treasury stocks and $5 billion cash dividends during the past quarter as returns to shareholders in its earnings report. Stock buyback is considered as a more flexible way to returned to shareholders comparing with issuance of cash dividends when a company is doing well.

4.Does PEP really have a lower P/E ratio?

Investors should also pay attention to P/E ratio. Pepsi’s P/E is around 14 and Coca-Cola’s is 30 now. However, based on both companies’ Q1 2019 financial result and earning estimate over next three quarters in 2019, you will find that both companies’ forward P/E of 2019 (estimated PE ratio) are around 22.23. People might feel Pepsi’s share price is cheaper if they look at current P/E, but might come to a different conclusion with forward P/E.