Intel Corporation Earnings For Q4 Could Beat Due To Strong PC Sales

Intel Corporation Earnings For Q4 Could Beat Due To Strong PC Sales
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Intel Corporation (NASDAQ:INTC) is scheduled to release its next earnings report after closing bell this afternoon. Wall Street expects Intel earnings to come in at 87 cents per share on an adjusted basis on $16.3 billion in revenue. In the same quarter a year ago, the chip maker reported $16.37 billion in sales and 79 cents per share in adjusted earnings.

At the time of the Q3 earnings release, management guided for revenue of $15.8 billion to $16.8 billion for Q4 with implied earnings per share at 86 cents at the midpoint.

Intel earnings for Q4: CCG sales may have beaten expectations

Wall Street is estimating that Intel’s Client Computing Group (CCG) revenue fell by more than 4% to $8.73 billion. Analysts believe Internet of Things revenue grew 19% year over year to $863.5 million.

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Deutsche Bank analyst Ross Seymore said in a preview note on Intel earnings that it’s possible the chip maker will beat estimates for revenue because of better-than-expected PC sales data. He added that Q4 monthly sales data for PC manufacturers in Taiwan were higher than what the Street had been expecting, coming in at a 6% quarter-over-quarter increase.

Further, he said that IDC data indicates that PC shipments increased 0.7% year over year in Q4, a significant improvement from the 0.5% decline recorded in Q3. He also explained that this should provide a boost to Intel’s CCG sales because he estimates that the segment made up about 53% of the company’s total sales during Q4. He’s currently estimating that Intel’s CCG sales declined 2% sequentially in Q4, including a 3% decline in PC Client sales and a 15% increase in modem revenues.

Other key metrics from Intel’s earnings release

He pegs Intel’s Data Center sales growth at 4% sequentially and estimates that the segment made up 31% of the chip maker’s total sales, driven by the Purley ramp, which he said implies that full-year 2017 Data Center Group (DCG) revenues grew 8% year over year. That would be in line with Intel management’s guidance for growth in the high-single-digit percentages.

Seymore also looks for Q4 Memory revenues to be up 10% sequentially, driven by strong NAND prices, and to contribute 6% of the company’s total revenue. He estimates that Programmable Solutions Group (PSG) revenues grew 10% sequentially. He also pegs Intel’s Q4 gross margin at 63%, a decline of 90 basis points quarter over quarter. That’s at the mid-point of management’s guidance, although he adds that there is a chance that the chip maker will beat his estimate due to strong PC Client sales.

Guidance expectations for Q1 Intel earnings

Seymore is currently estimating Intel’s Q1 sales at $14.8 billion, which would be a 10% quarter-over-quarter decline. He added that Intel may guide the midpoint of its Q1 revenue outlook a little higher than his estimate due to better-than-expected CCG revenues in Q4. He estimates Intel earnings for Q1 at 66 cents per share. Wall Street consensus stands at earnings of 72 cents per share on $15 billion in revenue for Q1.

On the earnings call tonight, Intel management will likely face a lot of questions about the Meltdown and Spectre security vulnerabilities in the company’s processors. Earlier this week, Intel announced that it has identified the main cause of the reboot problems with its Haswell and Broadwell chips and is working on a patch for it.

Intel stock jumped by more than 1% to as high as $46.37 in intraday trading today. The stock has rallied to nearly where it was trading in late December and also before the news about the Meltdown and Spectre vulnerabilities hit in late November.

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