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Intel (INTC) to Report Q3 Earnings: Is a Beat in Store?

Intel INTC is scheduled to report third-quarter 2018 results on Oct 25.

Notably, the company’s earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average positive surprise of 19.9%.

Last reported quarter, Intel reported non-GAAP earnings of $1.04 per share, beating the Zacks Consensus Estimate by a nickel. Moreover, the figure soared 44.4% from the year-ago quarter and 19.5%, sequentially.

In the second quarter, revenues totaled $16.96 billion, up 14.9% year over year and 5.6% quarter over quarter. The figure marginally surpassed the Zacks Consensus Estimate of $16.91 billion. Notably, the company surpassed the consensus mark in the trailing four quarters.

What to Expect?

Intel projects third-quarter 2018 revenues of around $18.1 billion (+/-$500 million), up 12% year over year on the back of continued strength in data-centric business.

The Zacks Consensus Estimate for revenues is currently pegged at $18.115 billion, reflecting year-over-year growth of around 12.2%.

Moreover, the analysts polled by Zacks predict third-quarter 2018 earnings of $1.15 per share, indicating a year-over-year rise of 13.9%.

Let’s see, how things are shaping up for the upcoming announcement.

Favorable ESP

According to the Zacks model, a company with a solid Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has good chances of beating estimates if it also has a positive Earnings ESP. The Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.

Intel has a Zacks Rank #3 and an Earnings ESP of +0.20%, which increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Intel Corporation Price and EPS Surprise

Intel Corporation Price and EPS Surprise | Intel Corporation Quote

Factors at Play in Q3

Intel’s focus on data center, cloud, self-driving car and Internet of Things (IoT) are key growth drivers for the third quarter.

We expect a robust performance from the data centric part to boost results. Data Center Group (DCG), Internet-of-Things Group (IOTG), Non-Volatile Memory Solutions (NSG) and Programmable Solutions Group (PSG) along with MobilEye form the crux of Intel’s data-centric business model, which contributed almost 50% of the company’s top-line.

The Zacks Consensus Estimate for DCG currently stands at $5.942 billion, higher than $4.878 billion a year ago.

Additionally, with a view to offer an ultra-portable laptop experience, the company introduced new 8th Gen Intel Core processors in the quarter under discussion. We believe, the new CPUs will expand the company’s customer base, bolstering its Client Computing Group (CCG) revenues in turn.

Notably, Microsoft’s MSFT newly announced Surface devices including Surface Pro 6 and Surface Laptop 2 leverage Intel’s new Quad Core 8th gen processor.

The Zacks Consensus Estimate for CCG is presently pegged at $9.289 billion, above $8.860 billion in the prior-year period.

Intel’s investments in field programmable gate array (FPGA) for acceleration (dramatically increases performances at very low power) and memory to reduce latency and increase speeds are helping it develop custom solutions for big players.

In fact, in the quarter under review, the company acquired eASIC to gain customized chip-making technology capabilities, upping the ante against Xilinx XLNX. Microsoft has selected Intel's FPGAs to power new Bing intelligent search features using real-time Artificial Intelligence (AI).

Significantly, eASIC team will join the chipmaker’s PSG unit. eASIC’s structured ASICs (application-specific integrated circuit) microchips are expected to add a considerable depth to Intel’s programmable solutions portfolio.

The Zacks Consensus Estimate for PSG is projected at $548 million, more than $469 million in the year-earlier quarter.

Intel’s 5G initiatives need no introduction. The company recently collaborated with SiTime Corporation in a bid to add Micro-Electrical-Mechanical Systems (MEMS) timing solutions capabilities to its 5G modem platforms.

Further, strong demand for data center solid state drive (SSD) solutions is anticipated to aid NSG unit results. Intel unveiled a new SSD with storage capacity of 32 terabytes (TB). The latest compact drive, developed on the company’s 3D NAND technology, is claimed to be Intel’s “densest drive ever”.

The Zacks Consensus Estimate for NSG unit is estimated to be $1.156 billion, above $891 million in the year-ago quarter.

During the third quarter, the company also acquired Vertex.AI, a Seattle, WA-based startup to add strong deep learning capabilities to its various operating domains. Notably, Vertex.AI will join Intel’s Artificial Intelligence Products Group.

Markedly, the sturdy synergies from MobilEye buyout enables Intel to offer almost anything related to self-driving vehicles — cameras, in-car networking, sensor-chips, roadway mapping, cloud software, machine learning and data management.

Another Stock That Warrants a Look

Here is another company, which per our model also has the right combination of elements to beat on earnings in the to-be-reported quarter:

Bristol-Myers Squibb Company BMY has an Earnings ESP of +0.73% and a Zacks Rank of 1. The company is slated to report third-quarter earnings on Oct 25. You can see the complete list of today’s Zacks #1 Rank stocks here.

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