Intel INTC is scheduled to release fourth quarter 2020 results on January 21, 2021.
At the third quarter earnings conference, management predicted that PC-centric businesses would fall by a low digit year after year, while data-centric businesses are expected to fall approximately 25% year-over-year in the fourth quarter.
Intel also expects consumer notebook momentum to continue into the fourth quarter, supported by remote work and online trends. In addition, increased supply can contribute to results.
According to preliminary results, released on January 13, the company expects fourth quarter earnings and earnings per share to exceed its previous guidance provided on October 22, 2020.
Notably, on January 13, Intel announced that it had named Pat Gelsinger as the company’s new CEO. Current CEO Bob Swan will step down on February 15, 2021. In addition, the chipmaker plans to provide updates on its robust progress in its 7 nanometer (nm) process technology during its fourth quarter earnings conference.
Main estimates for the fourth quarter
For the fourth quarter, Intel previously anticipated non-GAAP revenues of $ 17.4 billion. Zacks’ consensus estimate for revenue is estimated at $ 17.44 billion, indicating a 13.7% decline from the prior year quarter.
Intel Corporation price and EPS surprise
Intel Corporation’s surprise price-eps | Intel Corporation quote
For the fourth quarter, Intel had projected a non-GAAP earnings of $ 1.10 per share. Zacks’ consensus estimate for earnings is set at $ 1.10, stable over the past 30 days. The number suggests a fall of 27.6% in relation to the number reported in the previous year.
Notably, the company has exceeded profit estimates in each of the past four quarters, with the average surprise being 11.9%.
Factors to note
The slow demand for data centers in the end markets of companies and governments due to the crisis caused by the coronavirus, probably affected Intel’s performance in the fourth quarter.
However, the growing adoption of cloud-based solutions, mobile computing and network infrastructure for 5G, triggered by the momentum of the homework wave induced by the coronavirus crisis, may have dampened the predicted decline.
In addition, the wave of coronavirus-induced online learning and homework may have boosted sales of processors used in corporate laptops and data center servers. This, in turn, should be reflected in fourth quarter revenues.
Notably, the encouraging trend in PC shipments in the fourth quarter, driven by increased demand and an improvement in the supply chain, probably contributed to the revenues of Intel’s Client Computing Group (CCG) segment. According to IDC data, PC shipments in the fourth quarter of 2020 increased 26.1% year-on-year to 91.6 million units.
In addition, the robust adoption of Xeon processors, which are integrated with the Optane DC Persistent Memory solution, may have contributed to turnover in the quarter to be reported. The strong momentum for a 10 nm mobile CPU bodes well.
In addition, the incremental adoption of the latest Core vPro and Lakefield processors and Tiger Lake series offerings is likely to be reflected in the reported quarterly revenues.
In addition, higher Wi-Fi and modem sales and strong demand for notebooks remain favorable. Notably, Intel’s Optane DC persistent memory modules are being used by companies like Oracle ORCL, SAP, Google, Microsoft MSFT, Baidu and Alibaba.
In addition, the chip maker’s non-volatile memory business has likely gained from improved NAND price trends and Optane bit growth. In addition, the growing demand for server solid-state drives (SSD) in data centers, which has been driving growth in the NAND market, may have benefited the fourth quarter’s execution.
However, Mobileye’s new design wins and the growing 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 Advanced Driver Assistance (ADAS) SuperVision system in premium electric vehicles (EV) bodes well.
However, the slowness in Intel’s Internet of Things Group (IOTG) end markets, especially retail and industrial, must have affected revenues in the quarter under review.
In addition, the growing influence of Advanced micro devices‘AMD’s second generation of its EPYC server processors likely created price pressure and limited margin expansion.
In addition, rising expenses with the accelerated increase in 10 nm products and the improvement in 7 nm production must have affected fourth quarter profitability.
Intel currently carries a Zacks Rank # 4 (For Sale).
You can see today’s complete list of Zacks # 1 Rank (buy strong) shares here.
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