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Intel (INTC) to Report Q3 Earnings: What's in the Cards?

Zacks Equity Research

Intel INTC is scheduled to report third-quarter 2019 results on Oct 24.

Notably, the company’s earnings outpaced the Zacks Consensus Estimate in the trailing four quarters, with an average positive surprise of 12.02%.

Estimates for Q3

Intel expects third-quarter 2019 revenues of around $18 billion, excluding impact from sell of majority of its smartphone modem business to Apple AAPL. The Zacks Consensus Estimate is currently pegged at $18.04 billion, indicating a decline of 5.9% from the year-ago quarter.

Non-GAAP earnings are anticipated to be $1.24 per share. The Zacks Consensus Estimate for earnings has remained stable over the past 30 days at $1.24, suggesting a decline of 11.4% from the prior-year reported figure.

Q2 Performance at a Glance

Intel had reported second-quarter 2019 non-GAAP earnings of $1.06 per share, which beat the Zacks Consensus Estimate by 19.1%. Revenues totaled $16.505 billion, surpassing the Zacks Consensus Estimate by 5.8%.

Factors Likely to Influence Q3

Robust adoption of Intel’s latest high performance Xeon processors integrated with Intel’s Optane DC Persistent Memory solution is expected to get reflected in the third-quarter top line.

Notably, Intel’s Optane DC Persistent Memory modules are being leveraged in Oracle’s latest Exadata Database Machine X8M. Moreover, the solution has also been selected by the likes of SAP, Google, Microsoft MSFT, Baidu and Alibaba.

The chipmaker’s third-quarter revenues are expected to reflect its focus on enhancing field programmable gate array (FPGA) for acceleration and memory to reduce latency and increase speeds and consequently helping it develop custom solutions for big players.

Further, shift of company’s data center and client SSDs to 96-layer 3D NAND and 144-layer 3D NAND is expected to improve cost per gigabyte. These tailwinds might reflect on the third-quarter bottom line.

Intel Corporation Price and EPS Surprise


Intel Corporation Price and EPS Surprise

Intel Corporation price-eps-surprise | Intel Corporation Quote

Nonetheless, anticipated softness in NAND pricing and sluggishness in data center demand are likely to have negatively impacted third-quarter performance. Markedly, the Zacks Consensus Estimate for Data Center Group (DCG) currently stands at $5.569 billion, indicating year-over-year decline of 9.3%.

Talking about IoT businesses, Mobileye’s new ADAS wins and increasing proliferation of IoT are anticipated to have contributed to Intel’s third-quarter top-line performance.

Coming to PC-centric business, we believe incremental adoption of the latest processors is likely to have positively impacted Client Computing Group (CCG) segment performance. Moreover, improving trend in PC shipments is likely to have favored CCG revenues.

Notably, Microsoft’s newly announced Surface devices including Surface Pro 7 and Surface Laptop 3 13.5” variant leverage Intel’s new 10th gen Core processor.

However, management anticipates PC centric part of the business to be down in mid-single digits primarily due to deteriorating ASPs including products with lower core count. Markedly, the Zacks Consensus Estimate for CCG is presently pegged at $9.625 billion, indicating a decline of almost 6% from the year-ago reported figure.

Further, growing clout of AMD’s AMD second generation of its EPYC processors is likely to have created pricing pressure and limited margin expansion. Moreover, in the data-center storage market, the company faces stiff competition from Micron and Western Digital, which is anticipated to reflect on Intel’s third-quarter results.

Key Developments in Q3

Intel’s Barefoot Networks buyout, scheduled to close in the third quarter of 2019, is expected to aid the chipmaker in providing cloud-capable networking infrastructure, and augment data center customer base.

During the quarter under review, Intel showcased the latest 10 nanometer technology based AI processor, Springhill, at the Hot Chips Conference, Silicon Valley, CA. Per Intel, Facebook, one of the development partners in the project, has already begun utilizing the latest chip.

Moreover, latest devices in Dell Latitude Chromebooks family – Dell Latitude 5400 Chromebook Enterprise and Dell Latitude 5300 2-in-1 Chromebook Enterprise, utilize Intel processors. The devices are available in processor variants of Intel’s Celeron 4305U at 2.2 GHz, 8th Gen Core i3, Core i5-8365U and i7-8665U.

Zacks Rank

Currently, Intel carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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