Factors Expected to Influence Intel's (INTC) Q4 Earnings

Intel INTC is scheduled to report fourth-quarter 2018 results on Nov 24. Notably, the company’s earnings outpaced the Zacks Consensus Estimate in the trailing four quarters, delivering average positive surprise of 18.7%.

In the last reported quarter, Intel delivered non-GAAP earnings of $1.40 per share, which beat the Zacks Consensus Estimate by 25 cents. The figure surged 45.8% from the year-ago quarter and 33.3% sequentially.

Revenues totaled $19.163 billion, up 18.7% year over year and 13% quarter over quarter. The figure comfortably surpassed the Zacks Consensus Estimate of $18.115 billion. The year-over-year improvement can be attributed to impressive results from both data-centric and PC-centric businesses.

What to Expect?

Intel guided fourth-quarter 2018 revenues of around $19 billion, up 11% year over year. The projected figure is better than the Zacks Consensus Estimate of $19.01 billion.

Earnings are anticipated to be $1.22 per share, up 13% on a year-over-year basis. The Zacks Consensus Estimate is currently pegged at $1.22 per share.

For 2018, management expects revenues of almost $71.2 billion (up $1.7 billion from previous expectation). The Zacks Consensus Estimate is pegged at $71.2 billion. Intel now anticipates achieving total spending target of 29% of revenues in 2018.

Earnings are now projected to be around $4.53 per share, up 38 cents from previous guidance. The Zacks Consensus Estimate is pegged at $4.53 per share.

Intel’s stock has returned 7.5% in the past year, against the industry's decline of 12.1%.

Let’s see, how things are shaping up for the upcoming announcement.

Factors to Consider in Q4

Intel’s focus on data center, cloud, self-driving car, artificial intelligence (AI) and Internet of Things (IoT) are key growth drivers for the fourth quarter.

The chipmaker launched the much awaited Xeon Scalable CPUs featuring robust AI and memory capabilities. Notably, it has been selected by Alibaba (BABA) already.

The company showcased Xeon Scalable processor on 10nm Ice Lake architecture. Intel anticipates shipping of latest Ice Lake server processors, compatible with 14nm architecture (dubbed Cooper Lake), in 2020.

Furthermore, Intel has commenced shipping Cascade Lake Xeon Scalable processors. The robust adoption of the company’s CPU and GPU processors are expected to bolster Data Center Group or DCG revenues.

Additionally, with a view to offer an ultra-portable laptop experience, the company introduced new 9th Gen Intel Core processors in the quarter under review. Intel also showcased latest hybrid CPU architecture client platform, dubbed as “Lakefield” by the company. We believe, the new CPUs will expand the company’s customer base, bolstering its Client Computing Group (CCG) revenues in turn.

Further, Intel unveiled Project Athena, by which the company aims to enable advanced laptops to utilize robust technologies including 5G and AI. In a bid to raise the bar in network infrastructure, Intel unveiled latest network system on chip (SoC), dubbed as “Snow Ridge.” The latest SoC based on 10nm architecture enables edge computing with seamless access to 5G wireless network and is expected to find application in 5G base stations.

Intel revealed that it is working on an AI-based inference chip, NNP-I (Nervana Neural Network Processor for Inference). The chip is aimed at assisting companies having higher workloads with accelerated inference. Notably, Facebook is one of the development partners in the project.

As part of its efforts in emerging IoT and AI domain, Intel announced alliances with Comcast and Alibaba.

Mobileye inked a deal with Ordnance Survey, a U.K.-based mapping agency. Per the terms of the deal, automotive mapping capabilities of Mobileye will assist Ordnance Survey to provide reliable customized location information services to its customers. The latest services will support 5G and intelligent mobility systems, paving the way for “a fully connected” Britain.

Intel is leaving no stone unturned to enhance freight monitoring. The company is exploring various use cases beyond logistics industry in this regard with focus on automated shipment tracking.

For instance, in perishables domain, robust insights from Intel CLP is enabling Driscoll’s (a California-based company involved in providing fresh berries) to trim customer shipment rejections.

In the specialty products domain, Intel assists International Flavors & Fragrances, Inc. to track shipments in real-time, enabling it to address customs delays and rejections.

Notably, Intel unveiled Connected Freight in collaboration with Honeywell in May 2017.

These initiatives are expected to aid the company bolster Internet of Things Group or IOTG revenues, in turn top-line growth. Moreover, strength in retail and video applications are anticipated to drive IOTG revenues.

Further, the greater number of threads and cores in the recently introduced Intel Core i9-9900K gaming processor is anticipated to aid the semiconductor giant to improve its competitive position against peers like Advanced Micro Devices AMD.

All the above mentioned factors are likely to impact the company’s fourth-quarter results.

What the Zacks Model Unveils

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. The Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.

Intel has a Zacks Rank #2 and an Earnings ESP of -1.11%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks with Favorable Combination

Here are a few stocks that are worth considering as our model shows that these have the right combination of elements to deliver an earnings beat in the upcoming releases.

The Progressive Corporation PGR has an Earnings ESP of +1.82% and a Zacks Rank #1.You can see the complete list of today’s Zacks #1 Rank stocks here.

Intuitive Surgical, Inc. ISRG has an Earnings ESP of +2.63% and a Zacks Rank #2.

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