By: Craig Bowles
Intel, Corp. (INTC) is slated to report 4Q 2015 earnings after the bell on Thursday, January 14th. The earnings release is expected at approximately 4:00 p.m. EST 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
- Earnings Per Share (EPS): The consensus estimate is $0.63. (Source: Yahoo! Finance) Intel typically provides a “clean” number that is comparable to consensus but will otherwise publish a non-GAAP if need be.
- Revenues: Company guidance range is $14.3 bln to 15.3 bln. Analyst consensus expectations are for $14.80 bln.
- Gross Margin: Company guidance is 60% to 64%, so 62% is the midpoint.
- Revenue Guidance (1Q 2016): Analyst estimates are for $13.78 bln (range $13.20 bln to $14.50 bln).
- Gross Margin Guidance (1Q 2016): Last year was 4% below 4Q guidance and remaining 1% above that suggests 57% to 61%.
- Gross Margin Guidance (FY 2016): Recent company guidance has been weighed down by higher costs and lower volume. 2015 was expected at 59.5% to 63.5% with a 61.5% midpoint.
- Intel shares are yielding 2.8% compared to the 5-year average of 3.2%. Price/Earnings 14.6 compares to a 5-year average of 12.4; Price/Book of 2.8 compares to a 5-year average of 2.5; Price/Revenue of 3.0 compares to a 5-year average of 2.6; Price/Cash Flow of 8.6 compares to a 5-year average of 7.1.
- Analysts view Intel with 25 (up from 24 last qtr) Buy, 17 Hold, and 5 Sell ratings. (source: MarketBeat.com)
- Insiders have sold 420,969 (up from 166,693) shares over the last three months and 2,156,062 shares in the past year. Insiders haven’t purchased a single share in the past twelve months. (source: NASDAQ.com) In July 2014, Intel added $20 billion to the stock buyback plan and spent over half in 2014. Roughly $18 bln has been spent the past two years.
- 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 2.90%. Options are pricing in an implied move of 4.83% off earnings.
- 12/30: Macquarie Research maintained a Neutral rating on Intel with a price target of $34 following the acquisition closing of Altera Corporation (ALTR) on December 28, for $16.7 billion. ALTR is a strong “first acquisition” and would use it as a template for future deals, according to a post on Benzinga.com.
- 12/29: Citigroup has a Neutral rating on Intel and a $34 price target but said the company “massively overpaid” for chip maker Altera, according to a post by Barron’s.com.
- 12/29: Citigroup sees favorable PC trends into Q1 and further, according to a post by Barron’s.com.
Intel shares rallied in 2014 to catch back up with the general bull market of the previous two years, but have found resistance at $36 since. 2015 ended at similar levels as the end of 2014 when downside followed before finding support at $25, so the worry is a repeat. Seasonally, the stock tends to do well in the spring and early summer. Point and figure technicians have a bullish price objective of $55 with their support line lowered to $24 from $26. (Chart courtesy of StockCharts.com)
Analyst bullishness remains despite increased insider selling. The company had beaten earnings estimates by an average of 5c the last four quarters with one quarter in line. Varied market reactions, while positive, show the importance of underlying measures and guidance. Estimize consensus for an EPS of $0.64 on revenue of $14.823 bln compares to analyst consensus of $0.63 on revenue of $14.80 bln.
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