Intel Earnings Preview: Here’s What To Watch For

Intel Corporation (INTC) is scheduled to report first-quarter 2021 earnings on April 22 after the market closes. Over the past six months, shares of the tech giant have jumped 19% and are currently trading at over $63. A strong print could send shares on an upward trajectory, so let’s take a closer look at what analysts on the Street are expecting.

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Earnings Preview

Intel is expected to report adjusted EPS of $1.15 on revenues of $17.88 billion, while the company guided for earnings of $1.10 per share and adjusted revenues of $17.5 billion.

Meanwhile, the Earnings Whisper number, or the Street’s unofficial view on earnings, stands at $1.30 per share.

Prior Period Results

In the previous quarter, the company reported adjusted earnings of $1.52, in line with the prior-year quarter. That said, the result topped the consensus estimate of $1.10. In addition, revenue declined 1% to $20 billion, but surpassed analysts’ expectations of $17.5 billion. (See Intel stock analysis on TipRanks)

Factors To Look For

Intel works through various units, and of these, Client Computing Group (CCG), Data Center Group (DCG), Non-volatile Memory Solutions Group (NSG), and Mobileye were the top performers in 2020.

Notably, there was a spike in demand for enterprise laptops and data center servers as a result of the pandemic. Therefore, sales of processors might have supported the company’s revenues in the to-be-reported quarter.

Furthermore, Intel’s CCG segment revenues could have potentially risen due to encouraging demand for PCs. Additionally, higher demand for Wi-Fi and modem along with notebook demand should aid CCG revenues. The Mobileye segment most likely contributed to revenues thanks to the stabilizing automotive industry and its new offerings.

Though IOTG revenue was down in the prior quarter due to the impact of COVID-19, the company expects a recovery in 2021 on stabilizing industrial and video segments.

Intel’s innovative technologies are experiencing strong demand, the impact of which is likely to be recorded in the first quarter results. Notably, the company’s 11th Gen Intel Core Tiger Lake Processors, recent Core vPro and Lakefield processors could be revenue drivers.

Likewise, the 10-nanometer-based Xeon Scalable CPU Ice Lake has significant value across cloud, network, and edge workloads.

Furthermore, the company’s lead in key technology inflections including AI, 5G network transformation, and the intelligent autonomous edge might have accelerated growth. Moreover, the company’s network silicon product in wireless, enterprise, and cloud networks gives it a competitive edge and is likely to have bolstered revenues in the quarter.

However, the DCG segment might have disappointed due to continued weak enterprise and government demand for data center due to the pandemic.

Recent Developments

Earlier this month, the most advanced, highest performance data center platform has been launched by Intel. New 3rd Gen Intel Xeon Scalable processors will enable customers to capitalize on some of the most significant business opportunities by leveraging the power of AI, the company said.

Last month, the company announced the expansion of its semiconductor manufacturing capacity, with the initiation of two new factories (fabs) at the Ocotillo campus in Chandler, representing an investment of $20 billion.

Furthermore, the evolution of Intel’s integrated device manufacturing (IDM) model strategy, called IDM 2.0, was also announced. The fabs are expected to cater to the increasing requirements of Intel’s current products and customers in addition to providing committed capacity to foundry customers.

Updating the outlook for 2021 in late March, Intel CEO Pat Gelsinger said, “2021 is a transitional year as we accelerate Intel’s trajectory, invest in our future and improve our execution. We’re working aggressively with our supply chain partners and leveraging our unique manufacturing capabilities to solve for industry-wide component shortages and outperform this guide. Given the incredible demand for computing, the strength of our IDM 2.0 strategy and the technology investments we’re making, I’m certain Intel’s best days are in front of us.”

Notably, Intel expects continued strong notebook demand to aid its first-quarter 2021 results and exceed previous guidance.

Overall, investors might expect a ray of light when it comes to the issue of chip shortages, which have impacted semiconductor clients worldwide.

Analyst Recommendations

On April 19, Northland Securities analyst Gus Richard reiterated a Sell rating and a price target of $48 on the stock.

Richard expects “INTC to report in line with our estimates and above consensus.”

The analyst added, “Intel can sell every CPU they can produce as China Inc. builds a strategic inventory reserve of $100B to $150B of which we estimate $50B of that is in place by the end of Q1. Still, we expect Intel’s revenue in Q1 will likely underperform the PC market and semiconductor market.”

Overall, the stock has a Hold consensus rating based on 12 Buys, 10 Holds, and 8 Sells. The average analyst price target of $67.68 implies 6.6% upside potential from current levels.