Intel INTC will announce the results of the fourth quarter of 2020 on January 21, 2021.
At the third-quarter earnings conference, management expected computer-centric business to decline in low single digits on a year-on-year basis, while data-centric business was expected to decline about 25% year-on-year in the fourth quarter.
Intel also expected the momentum in consumer computing to continue in the fourth quarter, backed by external work and online trends. Increased supply can also contribute to the results.
According to preliminary results, released on January 13, the company expects earnings and earnings per share to exceed its previous guidance in the fourth quarter on October 22, 2020.
On January 13, Intel announced the appointment of Pat Gelsinger as the new CEO. Current CEO Bob Swan will retire on February 15, 2021. In addition, the chipmaker plans to provide information on its strong advancement in its 7-nanometer (nm) process technology during its fourth-quarter earnings conference.
Key Q4 estimates
For the fourth quarter, Intel previously expected non-GAAP revenue of $ 17.4 billion. The Zacks consensus revenue estimate was set at $ 17.44 billion, down 13.7% from the previous quarter.
Intel Corporation’s Price and EPS Surprise
Intel Corporation Price Eps Surprise | Intel Corporation Quote
For the fourth quarter, Intel forecast non-GAAP earnings of $ 1.10 per share. The Zacks consensus estimate for earnings was set at $ 1.10, which has been stable for the past 30 days. The figure indicates a decrease of 27.6% compared to the previous year.
It is particularly important that the company beat the revenue estimate in each of the four consecutive quarters, of which the average surprise was 11.9%.
Factors to pay attention to
The sluggish demand for data centers in the end markets for enterprises and the government due to a coronavirus crisis led to weakness in data center enterprises probably affected Intel’s performance in the fourth quarter.
However, a growing adoption of cloud-based solutions for mobile computers and network infrastructure for 5G, caused by momentum in the coronavirus crisis-induced work-from-home wave, dampened the expected decline.
In addition, coronavirus-induced work-from-home and online learning wave can boost the sales of processors used in laptops and data center servers. This in turn is expected to be reflected in revenue from the fourth quarter.
Strikingly, the encouraging trend in computer shipments in the fourth quarter, driven by increased demand and improvement in the supply chain, probably contributed to the segment revenue of Intel’s Client Computing Group (CCG). According to IDC data, computer shipments improved by 26.1% in the fourth quarter of 2020 compared to 91.6 million units.
In addition, the robust use of Xeon processors, integrated into the Optane DC Persistent Memory solution, may have contributed to the top line in the quarter to be reported. Strong momentum for 10 nm mobile CPU offers good forwards.
Incremental acceptance of the latest Core vPro and Lakefield processors and Tiger Lake series offerings is also likely to be reflected in the quarterly revenue reported.
Furthermore, higher Wi-Fi and modem sales and a strong demand for laptops are lagging behind. In particular, Intel’s Optane DC Persistent Memory modules are used by people like Oracle ORCL, SAP, Google, Microsoft MSFT, Baidu and Alibaba.
In addition, the chipmaker’s non-volatile memory business has likely benefited from the improvement in NAND price trends and Optane bit growth. The growing demand for SSDs for servers (SSDs) in data centers, which has driven growth in the NAND market, may also benefit the execution of the fourth quarter.
Nevertheless, Mobileye’s new design gains and increasing proliferation of IoT and the stabilization of the automotive industry may have contributed to Intel’s performance in the fourth quarter. The growing influence of Mobileye’s SuperVision surround-view Advanced Driver Assistance System (ADAS) in premium electric vehicles (EV) is very good.
However, the inertia of Intel’s Internet of Things Group (IOTG) end markets, particularly retail and industry, was likely to affect revenue in the year under review.
In addition, growing influence of Advanced micro-devices‘AMD’s second generation of its EPYC server processors have likely created price pressure and limited margin expansion.
It is also expected that increasing expenses for the accelerated build-up of 10 nm products and the improvement of the production of 7 nm would outweigh the profitability in the fourth quarter.
Intel currently has a Zacks Rank # 4 (Sell).
You can see the complete list of today’s Zacks # 1 Rank (Strong Buy) shares.
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