Texas Instruments 'King Of Cash Flow,' Says Mizuho In Initiation Note

In a report published Thursday, Mizuho analyst Vijay Rakesh initiated coverage of

with a Neutral rating and $57 price target, noting the company has "made all the right moves in a tough market" but the company is also a "broad and global" supplier to every vertical with no specific product cycles that depresses growth relative to more pro-cyclic peers. Rakesh continued that Texas Instruments supplies to almost all segments from computing to consumer, wireless and infrastructure, industrial and automotive. The company also has one of the first industry-leading 300mm Analog OEM fab capacity that can drive 15 percent to 20 percent lower chip costs compared to 200mm Analog capacity at its peers. Finally, the analyst pointed out that Texas Instruments continues to focus on shareholder friendly activities including buybacks and dividends. The company has committed 100 percent of its free cash flow post capex to buybacks and dividends which resulted in a 3.3 percent reduction in its share count from 2014. The company also has more than $3 billion remaining in its prior repurchase authorization. "Texas Instruments has executed very well, driving gross margins and free cash flow and it has behaved as a strong shareholder advocate by returning cash through dividends and buybacks," Rakesh concluded. Bottom line, the company competes in a "cyclical, technologically intensive industry" and sells to a broad industry base that is exposed to macro-economic factors, lumpiness in telecom and a global slowdown among others. A $57 price target is derived from an approximate 18.9x multiple on the analyst's fiscal 2016 earnings per share estimate of $3.02.