Intel (INTC) stock has enjoyed a nice rebound over the past year, rising some 65%, compared to the 22% rise in the S&P 500 index. This includes gains of close to 40% in six months, besting the 5% rise in the S&P 500 index. The valuation remains attractive and despite the recent outperformance, investors are betting on continued success in 2024.
The company reports fourth quarter fiscal 2023 earnings results after the closing bell Thursday. Expectations are high based on analyst's recently revised estimates, thanks to Intel’s strong Q3 results and confident guidance. Intel is also betting on its core CPU business, as well as broadening its AI initiatives to secure its piece of the AI pie. The company’s diverse business portfolio which has enabled it to serve multiple industries will help Intel establish a leadership position in AI.
The company has shown it has the financial firepower to effectively compete for these growth opportunities. As to what to expect during the quarter, Intel should show continued strength while advancing its strategic priorities. Although margins might be down from a year ago, they should show significant improvement from the previous two quarters. That said, the company on Thursday must deliver another top and bottom line beat, while selling the upside potential of its ongoing turnaround.
For the quarter that ended December, the Santa Clara, Calif.-based company is expected to earn 45 cents per share on revenue of $15.16 billion. This compares to the year-ago quarter when earnings were 10 cents per share on revenue of $14.04 billion. For the full year, earnings are expected to decline from $1.84 per share a year ago to 95 cents per share, while full-year revenue of $53.97 billion would decline 14.4% year over year.
While Intel has surpassed the Street’s earnings and revenue estimates in three of the past four quarters, weaknesses in the datacenter group and client computing group have pressured revenue. However, the expected year-over-year rise of 8% and 350% increase in revenue and profits, respectively, are the main drivers for the stock’s strong success. That said, the fact that full-year revenue is expected to decline 14% underscores why the management wants to pivot the company’s focus.
The market has begun to see evidence that the business can indeed improve, and that the company can stabilize revenues, while at the same time cutting operating cost. The company’s execution has been notable over the past three quarters. What’s more, Intel has begun to address its capital position, aiming to cut costs by $3 billion in this fiscal year, while reducing annual operating expenses by $8 to $10 billion by 2025.
At the same time, the company has also begun to benefit from a slight rebound in the personal computer market, which helped with a top and bottom line beat in the third quarter. Intel earned an adjusted 41 cents per share on $14.2 billion in revenue. Consensus of analysts expected Intel to earn an adjusted 22 cents per share on $13.6 billion in revenue. The strong beat was driven by the Client Computing Group which accounted for $7.87 billion in revenue, beating the $7.35 billion analysts were expecting.
Q3 Datacenter and AI revenue was also impressive, coming in at $3.8 billion, while the Network and edge segment generated revenue of $1.5 billion. The company's small-but-fast-growing foundry segment saw revenue rise nearly 300% year-over-year to $311 million. Intel has been showing promising results, and the company on Thursday must deliver another top and bottom line beat, while selling the upside potential of its recent manufacturing plants.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Richard Saintvilus
After having spent 20 years in the IT industry serving in various roles from system administration to network engineer, Richard Saintvilus became a finance writer, covering the investor's view on the premise that everyone deserves a level playing field. His background as an engineer with strong analytical skills helps him provide actionable insights to investors. Saintvilus is a Warren Buffett disciple who bases his investment decisions on the quality of a company's management, its growth prospects, return on equity and other metrics, including price-to-earnings ratios. He employs conservative strategies to increase capital, while keeping a watchful eye on macro-economic events to mitigate downside risk. Saintvilus' work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets. You can follow him on Twitter at @Richard_STv.
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