Memo to Jay Powell: Don't look at the stock price, listen to the conference call.
One of the most annoying parts of my job is that I have to make sense of all sorts of crazy moves -- including the rocketing of the stock of Texas Instruments (TXN) last night and today.
If you looked at the stock, the first thing you would say is that the economy must be doing so much better than expected because, in many ways, Texas Instruments represents the best microcosm of the economy -- the analog, so to speak, because it makes a ton of analog chips, which still happens to be TXN's core business.
If you listened to the conference call, though, which so few do, you would know that business is anything but strong.
The company started the session by saying that revenue were down 9% this quarter because of the "broad-based weakness" that's out there. Then management talked about how their core business of analog revenue -- think about some of the most basic uses of chips, such as sensors -- was down 6%.
Its digital business -- more sophisticated chips used in computers and cellphones -- was down an astounding 16%.
That's just awful.
The company talked about business year on year continuing to decelerate. It said industrial and automotive businesses were down upper single digits with no sign of a bottom.
Personal electronics, once such a growth industry for Texas Instruments, were down low double digits -- again because of the broad-based weakness in the overall economy.
Communications revenue, the exciting part of the business of Texas Instruments, with a lot of Apple (AAPL) business? It declined sequentially versus a very weak compare.
Automotive was called out several times as particularly weak.
So, given this awful mosaic of business why is the stock up and is it sending a false signal of sanguine economics?
The answer is absolutely. What Texas Instruments did do is top the revised-down estimates for earnings, clocking a $1.36 v. $1.22. The company has refined itself into a lean machine that can make far more during the downturn than thought. That means when you get an upturn, it can soar.
It's also growing faster than its peers. Although the company said not to rely on industry numbers too aggressively, an analyst pointed out on the call that the Semiconductor Industry Association's own numbers showed a 10% chip downturn in the global analog business and Texas Instruments overall was only down 6%.
Now there's a glowing stat.
Oh, and to be sure, with 3% to 4% Huawei business, there's more turmoil and weakness ahead if the trade talks go south, although it was encouraging that it was allowed to ship some chips for some non-national-security portions of Huawei's business, because it makes some chips for some allowed list that we don't know much about.
Suffice it to say that if you are going to use Texas Instruments, the stock, as a barometer of the economy, you would be dead wrong. But if you use Texas Instruments, the company, as a barometer of the economy and you were the Fed, you would cut rates -- and you would cut them now.