TXN – Market expectations are for Uniform ROA to hold steady, but management has concerns about revenue, inventory, and free cash flow

• Texas Instruments Incorporated (TXN:USA) currently trades near corporate averages relative to UAFRS-based (Uniform) Earnings, with a 20.7x Uniform P/E. At these levels, markets are pricing in expectations for the firm to maintain current profitability levels, but management may be concerned about revenue, inventory management, and free cash flow growth
• Specifically, management is confident recent declines in revenue are driven by broad-based weakness, and they appear concerned about the sustainability of recent investment gains and tax benefits. Moreover, they may be exaggerating the value they see from owning and controlling their inventory, and they appear concerned about the sustainability of recent fall-through. Furthermore, they may lack confidence in their ability to continue improving utilization, and they appear concerned about the amount of cash they have deployed to inventory. Finally, they may lack confidence in their ability to grow free cash flow per share, and they appear concerned about the impact of their shipping halt related to Huawei.