Semi Stocks' Earnings on Jan 25: INTC, KLAC, MXIM & MSCC
The Q4 earnings cycle is in full swing with a number of semiconductor companies slated to report the quarterly numbers over the next few days. The industry serves as a driver, enabler and indicator of technological progress.
According to the Earnings Preview dated Jan 19, technology is one of the six sectors predicted to report double-digit earnings growth this quarter. Per the report, total earnings for the tech sector are projected to be up 14.3% on 8.7% higher revenues.
We note that the technology sector has been a robust performer over the past year. The sector has been benefiting from the increasing demand for cloud-based platforms, growing adoption of Artificial Intelligence (AI) solutions, Augmented/Virtual reality devices, autonomous cars, advanced driver assisted systems (ADAS) and Internet of Things (IoT) related software.
We believe the aforementioned emerging trends have provided some much-needed opportunity to semiconductor companies to counter the loss of business due to the declining PC market which still consumes bulk of chips. Notably, according to the latest report of World Semiconductor Trade Statistics (WSTS), semiconductor revenues climbed 20.6% year over year to $408.7 billion in 2017.
It is believed that the semiconductor industry will continue to witness growth this year as well, although not as high as 2017, but still at a respectable rate. Per the WSTS report, semiconductor revenues are likely to touch $437.3 billion in 2018, representing growth of 7.7%.
The industry is poised to benefit from the rising demand from the aforementioned new trends in technologies, deployment push of 5G-broadband technology across the globe and President Trump’s pro-business policies, including tax cuts, deregulation and outlays on infrastructure.
However, this does not ensure earnings beat for all companies in the space. It should be noted that a company’s earnings outperformance is dependent on the overall business environment as well as management’s ability to implement operating and strategic plans.
In other words, a company may perform dismally despite a favorable business environment if it fails to capitalize on the opportunities due to lack of execution.
Let’s see what’s in store for these semiconductor stocks, all of which are slated to release quarterly figures tomorrow.
The world’s largest semiconductor company Intel Corporation INTC is scheduled to report fourth-quarter 2017 results. We expect this Zacks Rank #3 (Hold) company to post earnings of 86 cents per share and revenues of $16.3 billion. Estimates, when compared with the year-ago quarter figures, represent 8.9% increase for earnings and almost flat growth for revenues. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Intel Corporation Price and EPS Surprise
Intel Corporation Price and EPS Surprise | Intel Corporation Quote
Intel’s earnings report will still serve as an important bellwether for the entire technology sector, but the stock has struggled to gain momentum as investors have become increasingly concerned with this chipmaker’s competition. Of late, the company has been sensing the pressure from the likes of NVIDIA and Avanced Micro Devices. Nvidia’s artificial intelligence processors are already at the forefront of the booming AI industry, while AMD has doubled down on its server chips. And both of these companies compete with Intel in the ever-important gaming segment.
However, we anticipate the company’s impressive growth at the data-center group segment to cushion its top- and bottom-line results. Increasing demand for data storage and high-performance networks has been propelling this segment’s growth. As the number of smartphones and Internet-connected devices escalates, along with the rise of artificial intelligence and cloud computing, Intel’s data-center business will expand. (Read: Factors That Are Likely to Impact Intel's Q4 Earnings)
Let’s take a sneak peek at KLA-Tencor Corporation KLAC, which is set to report second-quarter fiscal 2018 results. We expect KLA’s top-line growth to benefit from its expanding product portfolio. The company is well poised to gain from sturdy demand for more efficient manufacturing processes. Moreover, the technical complexity of manufacturing semiconductors and increasingly challenging yield issues are anticipated to steer growth from the company’s process control and yield management solutions. (Read: KLA-Tencor Q2 Earnings to Gain From Product Strength)
KLA-Tencor Corporation Price and EPS Surprise
KLA-Tencor Corporation Price and EPS Surprise | KLA-Tencor Corporation Quote
The Zacks Consensus Estimate for the company’s revenues and earnings are pegged at $960.2 million and $1.72, respectively, for the to-be-reported quarter. Estimates, when compared with the year-ago quarter’s figures, indicate growth of 9.5% for revenues and 13.2% for earnings. The stock has a Zacks Rank #2 (Buy).
Lastly, Microsemi Corporation MSCC is another company scheduled to release first-quarter fiscal 2018 earnings numbers. The Zacks Consensus Estimate for the company’s revenues and earnings are pegged at $460.1 million and $1.01, respectively, for the quarter under review. Estimates, when compared with the year-ago quarter figures, indicate growth of 5.6% for revenues and 17.4% for earnings. The stock has a Zacks Rank #3.
Microsemi Corporation Price and EPS Surprise
Microsemi Corporation Price and EPS Surprise | Microsemi Corporation Quote
The company’s data-center segment is likely to continue its outperformance in the to-be-reported quarterly results, chiefly driven by the sound adoption of the latest technologies, including AI and HPC. Increasing usage of its smart-controller solutions on Intel’s Parley platform is also anticipated to prove conducive to growth. Also, an improving economy and energy markets, continuing semi-cap strength, as well as demand for emerging industrial automation and motor control applications is likely to drive its Industrial market segment revenues. Nonetheless, pockets of weakness related to product transition at medical customers and push-out of some communications spending in China are likely to dent revenues.
Another semiconductor company, Maxim Integrated Products, Inc. MXIM, is scheduled to report second-quarter fiscal 2018 results. The Zacks Consensus Estimate for the company’s revenues and earnings are pegged at $619.9 million and 64 cents, respectively, for the to-be-reported quarter. Estimates, when compared with the year-ago quarter’s figures, indicate growth of 12.5% for revenues and 39.1% for earnings. The stock carries a Zacks Rank #5 (Strong Sell).
Maxim Integrated Products, Inc. Price and EPS Surprise
Maxim Integrated Products, Inc. Price and EPS Surprise | Maxim Integrated Products, Inc. Quote
The company’s fiscal second-quarter revenues will likely gain from sturdy demand for its Automotive and Industrial end-products. However, the concentration of Maxim’s mobility revenues at Samsung is a big concern. Samsung’s projections and announcements, especially those related to its high-end models, where Maxim has greater exposure, might have a significant impact on the company’s performance. (Read: Will Maxim's Q2 Earnings Gain from Auto Strength?)
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