Income · Stocks to Consider and Updates

Intel Beats Estimates; Raises Guidance

Chip giant Intel Corp. (NASDAQ: INTC – $47.61) reported second-quarter earnings that were largely positive, though its share price has pulled back by over 8% in early trading. Total revenue came in at nearly $17 billion, which was slightly higher than Street estimates of $16.9 billion. Share net totaled $1.04, eight cents better than consensus and outdistanced the previous-year tally of $0.72. The company achieved top-line growth across the board. Specifically, the PC-centric business posted a sales increase of 6%, given strong demand for gaming and commercial products. Though PC volumes were down 1% compared to last year, average selling prices for desktop products climbed 13%. Sales at the all-important data-centric businesses increased 26% to $5.5 billion, fueled by a 27% advance at the Data Center Group. This division benefited from strong results from cloud and communications services providers, owing to the ample demand for data and efforts to improve the performance of data-intensive workloads, such as artificial intelligence. However, the growth failed to live up to the consensus expectation of $5.61 billion. Finally, Intel’s memory, Internet of Things and Mobileye businesses each achieved record quarterly revenue during the June period. Mobileye, sales soared 37%, reflecting the adoption of advanced driver-assistance increases.

        Given the recent performance, management has upped its guidance for the third-quarter and full-year 2018. The top line is likely to be $18.1 billion (plus or minus $500 million) during the September quarter, which should result in earnings per of $1.15 vs. Street views of $1.13. For the full year, sales are expected to be about $69.5 billion, with earnings of around $4.15, also ahead of expectations of $4.11. In all, I believe Intel is headed in the right direction. Management has done a good job of steering the company away from the mature PC market and towards higher-growth segments, such as data-centric products and chips for autonomous cars. It should be noted that Intel stock has enjoyed strong price advances in recent months, thanks to healthy earnings gains. However, as was the case during the first-quarter earnings announcement, if figures don’t quite live up to heightened expectations, the share price will probably attract some sellers. That appears to be the case once again. Still, this blue-chip technology stock should make for a solid holding in a well-diversified income portfolio, thanks in part to the company’s growing dividend, yielding 2.3%.

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