North America

Earnings Preview: Intel Corp. Q1 2017 (INTC)

By: Craig Bowles

Overview

Intel, Corp. (INTC) is slated to report 1Q 2017 earnings after the bell on Thursday, April 27th. The earnings release is expected at approximately 4:00 p.m. ET with a webcast conference call to follow at 5:00 p.m. accessible through Intel Investor Relations. A member of the Dow Jones Industrial Average, S&P 500, and NASDAQ 100, Intel has significant market influence and the potential to impact the broader market gauges. Other tech names are often impacted by the results, along with related ETFs such as the PowerShares (QQQ) & Market Vectors Semiconductor ETF (SMH).

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Outliers & Strategy

Key measures:

  • Non- GAAP Earnings Per Share (EPS): Company guidance is $0.60 to $0.70. The consensus estimate is $0.65. (Source: Yahoo! Finance) Intel typically reported a “clean” number that was comparable to consensus before 2016. Consensus was $0.61 three months ago.
  • Revenues: Company guidance is $14.3 bln to 15.3 bln. Analyst consensus expectations are for $14.81 bln. Consensus was $14.53 bln three months ago.
  • Gross Margin: Company guidance is Non- GAAP 61% to 65%.
  • Revenue Guidance (2Q 2017): Analyst estimates are for $14.34 bln (range $13.59 bln to $14.84 bln).
  • Gross Margin Guidance (2Q 2017): Anything in the 61% to 65% range would be in keeping with 2017 expectations.
  • Guidance (FY 2017): Gross Margin Non- GAAP is 61% to 65%; Non-GAAP EPS $2.66 to $2.94; Revenue similar to 2016 of $59.4 bln.
  • Intel shares are yielding 2.9% compared to the 5-year average of 3.2%. Price/Earnings 17.1 compares to a 5-year average of 13.4; Price/Book of 2.6 compares to a 5-year average of 2.5; Price/Revenue of 3.0 compares to a 5-year average of 2.7; Price/Cash Flow of 8.1 compares to a 5-year average of 8.0.
  • Analysts view Intel with 26 Buy, 14 Hold, and 3 Sell ratings. (source: MarketBeat.com)
  • Insiders have sold 758,379 shares over the last three months and 2,251,656 shares in the past year. (source: NASDAQ.com) In July 2014, Intel’s September 2014 buyback plan was $20 billion and is not expected to be added to given the 2016 Altera purchase.
  • Intel is the first of the major semiconductor companies to report quarterly results and could impact Advanced Micro Devices (AMD), Texas Instruments (TXN), STMicroelectronics (STM), Qualcomm (QCOM), and Applied Materials (AMAT).
  • Intel has 1-day average price change on earnings of 3.59%. Options are pricing in an implied move of 3.66% off earnings.

Recent News

  • 04/03: BlueFin Research Partners notes strong and better than expected chip production for Intel in the month of March and estimates the March quarter production levels to be up 1-1.5% sequentially , according to a post by Barron’s.com.
  • 04/03: Credit Suisse maintained a Neutral rating after Intel boasted of maintaining a three-year lead over rivals in making the most powerful transistors. The stock is trading at EV/FCF of 17.5x, an 18% premium to the 5 year median of 14.8x, albeit a 17% discount to the SPX, according to Barron’s.com.
  • 03/27: Susquehanna has a “Positive” rating on Intel and suggests after talking with the supply chain the company could possibly take all of Qualcomm’s share of Apple (AAPL) iPhone wireless chips in 2018, according to a post by Barron’s.com.
  • 03/13: Jefferies & Co. downgraded Intel to Hold because of the company’s proposed $15.3 billion acquisition of Mobileye (MBLY), according to a post by CNBC.com.

Technical Review

Intel shares ran into resistance above $35 in Q4 2014 after catching back up with the general bull market of the previous two years. The stock is struggling to push much above that level more recently despite the general market having moved higher. Seasonally, the stock tends to do well in the spring and early summer. Point and figure charts show $30 support. (Chart courtesy of StockCharts.com)

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Summary

The significance of personnel departures is being debated. Analyst bullishness remains solid but insider selling remains at increased levels. The company has beaten earnings estimates by an average of 6c the last four quarters. Varied market reactions show the importance of underlying measures and guidance. Estimize consensus for an EPS of $0.67 on revenue of $14.875 bln compares to analyst consensus of $0.65 on revenue of $14.81 bln.

 

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