North America

Earnings Preview: Intel Corp. Q4 2016 (INTC)

By: Craig Bowles

Overview

Intel, Corp. (INTC) is slated to report 4Q 2016 earnings after the bell on Thursday, January 26th. 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:

  • Earnings Per Share (EPS): The consensus estimate is $0.74 (range $0.64 to $0.79). (Source: Yahoo! Finance) Intel typically provides a “clean” number that is comparable to consensus but will otherwise publish a non-GAAP if need be as they did last quarter. Consensus was $0.74 three months ago.
  • Revenues: Company guidance range is $15.2 bln to 16.2 bln. Analyst consensus expectations are for $15.75 bln. Consensus was $15.85 bln three months ago.
  • Gross Margin: Company guidance is Non- GAAP 61% to 65%.
  • Revenue Guidance (1Q 2017): Analyst estimates are for $14.53 bln (range $14.20 bln to $15.31 bln).
  • Gross Margin Guidance (1Q 2017): Anything in the 59% to 65% range would be in keeping with 2016 expectations.
  • Gross Margin Guidance (FY 2017): Company guidance is expected. 2016 Non- GAAP guidance was 60% to 64%.
  • Intel shares are yielding 2.8% compared to the 5-year average of 3.2%. Price/Earnings 17.3 compares to a 5-year average of 13.4; Price/Book of 2.8 compares to a 5-year average of 2.5; Price/Revenue of 3.1 compares to a 5-year average of 2.7; Price/Cash Flow of 9.4 compares to a 5-year average of 8.0.
  • Analysts view Intel with 32 (30 last qtr) Buy, 13 Hold, and 2 (3 last qtr) Sell ratings. (source: MarketBeat.com)
  • In July 2014, Intel’s September 2014 buyback plan was $20 billion and is not expected to add to that soon 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 3.54%. Options are pricing in an implied move of 3.48% off earnings.

Recent News

  • 01/12: Research firm Gartner reported a 3.7% quarterly decline for personal computer sales in Q4 which RBC Capital noted was better than expected by Intel, according to a post by Barron’s.com.
  • 01/09: At CES 2017, Intel demoed a new headset that allows virtual reality (VR) wearers to roam free, according to Barron’s.com.
  • 01/06: BlueFin Research Partners notes that Intel’s chip production in the month of December “indicated no signs of slowing down even through the holiday period,” according to a post by Barron’s.com.
  • 12/05: Morgan Stanley has an Underweight rating on Intel but is encouraged after meeting with the “pragmatic” Murthy Renduchintala who heads the company’s client computing and IoT efforts, according to a post by Barron’s.com.

Technical Review

Intel shares rallied in 2014 to catch back up with the general bull market of the previous two years, becoming more of a market performer since was somewhat expected. Seasonally, the stock tends to do well in the spring and early summer. Point and figure technicians have a bullish price objective of $54. (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 has steadily increased the past three quarters. The company had beaten earnings estimates by an average of 8c the last four quarters. Varied market reactions, while mostly positive, show the importance of underlying measures and guidance. Estimize consensus for an EPS of $0.78 on revenue of $15.824 bln compares to analyst consensus of $0.74 on revenue of $15.75 bln.

 

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