TEXAS INSTRUMENTS INC. $48 - Nasdaq symbol TXN

TEXAS INSTRUMENTS INC. $48 (Nasdaq symbol TXN; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 1.1 billion; Market cap: $52.8 billion; Price-to-sales ratio: 4.2; Dividend yield: 2.5%; TSINetwork Rating: Average; www.ti.com) used to focus on chips for cellphones, but has shifted to analog chips, which convert inputs like touch, sound and pressure into electronic signals that computers can understand. Manufacturers use these chips in a variety of products, including cars, medical devices and appliances.

In the quarter ended June 30, 2014, the company’s earnings rose 3.5%, to $683 million from $660 million a year earlier. Texas Instruments spent $743 million on share buybacks during the quarter. As a result, earnings per share gained 6.9%, to $0.62 from $0.58.

Revenue rose 8.0%, to $3.3 billion from $3.0 billion. Strong demand for analog and embedded processor chips (which perform mathematical calculations) offset lower sales of other chips and calculators.

Now that the company has stopped making wireless chips, its research costs fell to 10.6% of revenue from 12.8% a year ago.

Thanks to its rising revenue and improving efficiency, the company’s gross profit margin (gross profits as a percentage of revenue) rose to a record 57.1% from 51.5% a year earlier.

The company will probably earn $2.41 a share in 2014, and the stock trades at 19.9 times that estimate. The $1.20 dividend yields 2.5%.

Texas Instruments is a buy.

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