Income · Stocks to Consider and Updates

Intel Beats on Earnings as Sales Slow; Guidance Disappoints

Intel Corp’s. (NASDAQ: INTC – $46.60) fourth quarter was a positive one, with bottom line results coming in better than expectations. The chipmaker posted adjusted earnings per share of $1.28, six cents ahead of consensus and nicely above last year’s $1.08. Sales came in at $18.7 billion, which was slightly below Street estimates. The PC unit advanced 10%, thanks to continued strong demand for Intel’s higher performance products, along with added strength in commercial and gaming sources. The data-centric business improved 9%, due to 24% cloud segment growth and 12% communications service provider segment expansion, which helped to offset a 5% decrease in enterprise products. While the Internet of Things category registered a 7% decline from last year’s comparable-period, the segment advanced 4% if the divestiture of Wind River was excluded. What’s more, Intel’s Network Services Group (memory) and Programmable Solutions Group posted record quarterly sales during the fourth period, as business benefited from strength in the data center and communications market segments. Finally, the lucrative Mobileye business, which provides chips for self-driving vehicles, achieved a 43% increase at the top line to $183 million, as customer design momentum continued.

       However, the outlook for the first quarter of 2019 wasn’t promising and shares of Intel are retreating about 6 ½% in today’s trading. Management looks for sales to be about $16 billion with adjusted share earnings of $0.87 compared to analysts’ estimates of $0.91. The watered-down expectations can be, in part, blamed on a slowdown in China’s economy, coupled with ongoing trade tensions between the United States and China.  However, I continue to favorably view the stock for the long haul. Intel is well positioned in a number of growing businesses and has expanded nicely into new revenue drivers. Its risk-adjusted return potential remains in tact, as the $1.20 dividend is well covered and yields investors 2.5%.

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