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Will New Offerings & Alliances Aid Intel's (INTC) Q1 Earnings?

Zacks Equity Research

Intel INTC is set to report first-quarter 2019 results on Apr 25. Notably, the company surpassed the Zacks Consensus Estimate for earnings in the trailing four quarters, recording an average positive earnings surprise of 13.6%.

Past-Quarter Performance

Intel had delivered fourth-quarter 2018 non-GAAP earnings of $1.28 per share, which beat the Zacks Consensus Estimate by 6 cents. The figure marked an 18.5% improvement from the year-ago quarter but a decline of 8.6% sequentially.

Revenues had totaled $18.657 billion, up 9.4% year over year on growth witnessed in both data-centric and PC-centric businesses. The figure however declined 2.6% on a quarter-over-quarter basis and lagged the Zacks Consensus Estimate of $19.010 billion.

Intel’s stock has returned 14.5% in the past year, substantially outperforming the industry's growth of 5.1%.

 

 

Let’s see how things are shaping up prior to this announcement.

Factors at Play

Intel’s focus on data center, cloud, self-driving car, AI and IoT is likely to have acted as a key catalyst for the to-be reported quarter. We are particularly optimistic about the data center business, for which Intel is striving to raise the bar with innovative products and strategic collaborations.

Intel’s latest data center processors have recently been selected by Super Micro Computer Inc. and Dell EMC. Moreover, the company’s Optane DC persistent memory solution introduced on Google Cloud is enabling users to upscale workloads and process huge amounts of data faster in a secure architecture. Its investments in field programmable gate array for acceleration, and memory to reduce latency and increase speeds should drive revenues in the to-be-reported quarter.

Further, the company recently announced the availability of data-centric solutions. The product family comprises the much-awaited 2nd-Generation Xeon Scalable processors, Intel Optane DC memory and storage solutions, and software and platform technologies featuring robust AI and memory capabilities. We believe that these launches should improve scalability, reliability, power and density requirements of HPC deployments, positively impacting the to-be-reported quarter’s business.

We anticipate the product launches to bolster Intel’s footprint in the market amid rising competition from Advanced Micro Devices AMD, NVIDIA and Qualcomm, which in turn is likely to aid the company’s top line in the quarter under review.

The robust adoption of Xeon Scalable processors is anticipated to bolster the company’s CCG revenues in the quarters ahead, including the upcoming results. The Zacks Consensus Estimate for first-quarter revenues for the Client Computing Group segment is currently pegged at $8.39 billion, above $8.22 billion reported in the year-ago quarter.

The Zacks Consensus Estimate for first-quarter earnings is pegged at 87 cents per share, unchanged for the last 30 days. The Zacks Consensus Estimate for revenues stands at $16.01 billion, suggesting a decline of 0.33% from the year-ago reported figure.

However, we believe weakness in demand from China, declining trend in PC shipments, softness in NAND flash pricing trends, lackluster modem business, and constrained supply will impact first-quarter results.

What the Zacks Model Unveils

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance 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 +0.17%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks with Favorable Combination

Here are some other stocks worth considering as our model shows that these too have the right combination of elements to deliver an earnings beat in the upcoming releases.

Xilinx, Inc. XLNX has an Earnings ESP of +2.03% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Lockheed Martin Corporation LMT has an Earnings ESP of +4.16% and a Zacks Rank #3.

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