Chip behemoth Intel (INTC – Free Intel Stock Report) continues to impress. On point, March-period earnings per share clocked in at $0.87 on a non-GAAP basis, a sharp improvement over both our estimate of $0.70 and the year-earlier tally of $0.66, on a 9% top-line advance. Intel shares were trading moderately higher on the news.
Looking at the quarter with more granularity, the company's results continue to be driven by data-centric businesses, which now account for approximately half of the top line. The Data Center Group registered gains across all markets and experienced increasing adoption of Xeon Scalable processors, including for artificial intelligence workloads. The Non-Volatile Memory Solutions Group posted a 20% year-over-year advance at the top line, driven by storage. Meantime, the Programmable Solutions Group garnered several design wins with original equipment manufacturers. What's more, stellar demand from retail and video customers drove first-quarter growth in the Internet of Things Group. The Client Computing Group introduced a line-up of high-performance mobile products, including the 8th Gen Intel Core i9 processor. Finally, in autonomous driving, Mobileye continues its strong momentum and recently garnered a high-volume design win for EyeQ*5. This is a system-on-a-chip device that supports intense vision processing, and still maintains low power consumption. Intel has begun offering autonomous vehicle test cars in Israel with plans to expand the fleet to other geographies.
Management gave strong guidance for the remainder of 2018. Specifically, it looks for full-year revenues of $67.5 billion, plus or minus a couple of hundred million, and non-GAAP share earnings of $3.85. This is a considerable increase from our view (which was on par with Intel's guidance) at the time of our March 30th full-page report. Previously, we looked for revenues of $65 billion, with share net clocking in at $3.55.
Why the increased optimism? It appears that Intel's enhanced focus on data-centric businesses is bearing fruit. In this day and age, big data is a very lucrative market, and having the ability to analyze and use that data could add meaningfully to the bottom line. What's more, the company is in two higher-growth segments of the chip market. The Internet of Things is also a very attractive segment and we look for this trend to continue. This unit finds ways to connect everyday appliances and products with one another and share data. An example of this is home thermostats that can be controlled from miles away via a cellular phone. Furthermore, autonomous cars are one of the most talked about products for the long run. Though mass production might be at least a few years away, Intel should be well positioned in the middle of the pack, thanks to its Mobileye acquisition.
We continue to recommend Intel shares to long-term investors seeking a technology holding. The company has done a solid job of diversifying its operations beyond its bread-and-butter personal computer business. Indeed, this is a mature market and growth, if any, is mundane. Through acquisitions and innovation, Intel has entered some of the hottest segments of the semiconductor market. The company also pays a dividend, which is not common in the technology industry. This is an added bonus and provides a level of support for its shares.
About The Company: Intel Corporation is a leading manufacturer of integrated circuits. In addition to primarily supplying manufacturers of personal computers, the company serves a multitude of other global markets, including communications, industrial automation, military, and other electronic equipment. Intel’s product line consists of microprocessors, with the Pentium series being the most notable. It also manufactures microcontrollers and memory chips, and the company sells computer modules and boards, and network products.
— Alan House
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
