By: Craig Bowles
Intel, Corp. (INTC) is slated to report 2Q 2017 earnings after the bell on Thursday, July 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).
Outliers & Strategy
- Non- GAAP Earnings Per Share (EPS): Company guidance is $0.63 to $0.73. The consensus estimate is $0.68. (Source: Yahoo! Finance) Intel typically reported a “clean” number that was comparable to consensus before 2016. Consensus was $0.63 three months ago.
- Revenues: Company guidance is $13.9 bln to 14.9 bln. Analyst consensus expectations are for $14.41 bln. Consensus was $14.34 bln three months ago.
- Gross Margin: Company guidance is Non- GAAP 61% to 65%.
- Adjusted Earnings Per Share (EPS) Guidance (3Q 2017): Analyst estimates are for $0.74 (range $0.71 to $0.77.
- Revenue Guidance (3Q 2017): Analyst estimates are for $15.32 bln (range $15.11 bln to $15.80 bln).
- Gross Margin Guidance (3Q 2017): Anything in the 61% to 65% range would be in keeping with 2017 expectations.
- Adjusted Earnings Per Share (EPS) Guidance (FY 2017): Company guidance is $2.85. Analyst consensus is for $2.86.
- Revenue Guidance (FY 2017): Company guidance is $60 bln. Analyst consensus is for $60.18 bln.
- Gross Margin Guidance (FY 2017): Company guidance is Non- GAAP 61% to 65%.
- Intel shares are yielding 3.0% compared to the 5-year average of 3.2%. Price/Earnings 15.0 compares to a 5-year average of 13.4; Price/Book of 2.4 compares to a 5-year average of 2.5; Price/Revenue of 2.8 compares to a 5-year average of 2.7; Price/Cash Flow of 7.8 compares to a 5-year average of 8.0.
- Analysts view Intel with 26 Buy, 13 Hold, and 4 (3 last qtr) Sell ratings. (source: MarketBeat.com)
- Insiders have sold 143,669 shares over the last three months and 2,133,426 shares in the past year. (source: NASDAQ.com) Intel approved $10 billion additional stock buybacks in April which brings the total available to $15 billion.
- 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 2.81%. Options are pricing in an implied move of 3.19% off earnings.
- 07/14: Rosenblatt Securities reiterated a Sell rating on Intel, arguing that AMD may have a manufacturing advantage for its new server chip, “Epyc,” because its smaller than Intel’s newly unveiled “Purley” part, according to a post by Barron’s.com.
- 07/13: Cowen says manufacturing data out of Asia suggest a weaker-than-normal Q3 and lowered their outlook for personal computers this year to a drop of 6% in units which is 100bp below Intel’s outlook, according to Barron’s.com.
- 07/12: Hilliard Lyons initiated coverage of Intel with a Long-term Buy rating citing a positive view of Intel’s strategy shift toward the data center, connecting end devices including autos, and away from a PC centric focus. Other analysts reiterated their ratings after the chip unveiling of its “Purley” for Xeon server chips, according to a post by Barron’s.com.
- 07/10: Jefferies downgraded Intel to Underperform from Hold and said the dominance of the data center is at risk as the computing industry moves to a “fourth wave” called parallel processing computing, according to a post by Barron’s.com.
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 has struggled to push much above that level since, despite the general market having moved higher. Seasonally, the stock tends to do well in the spring and early summer. Downside support has a balance area around $30 should the stock move lower. (Chart courtesy of StockCharts.com)
Jefferies warns that Intel would be the most in danger of a fourth big change in computing, following mini computers, PCs, and smartphones. Analyst bullishness remains solid. insider selling eased with stock’s decline in June. Intel added another $10 bln to their stock buyback program which was kind of surprising given the recent Altera purchase. The company has beaten earnings estimates by an average of 5c the last four quarters. Varied market reactions show the importance of underlying measures and guidance. Estimize consensus for Non-GAAP EPS of $0.69 on revenue of $14.425 bln compares to analyst consensus of $0.68 on revenue of $14.41 bln.
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