Chip behemoth Intel (INTC - Free Intel Stock Report) has reported solid March-period results, but the revised outlook for the June interim was not what Wall Street was expecting to see.
Looking at it with a bit more granularity, March-quarter sales came in at $16.1 billion, which was a tad higher than our $16 billion estimate. Likewise, share net was actually a couple of pennies higher than we expected, totaling $0.89 on a non-GAAP basis (excludes items we deem to be nonrecurring in nature). On the plus side, the PC-centric segment registered a 4% uptick in sales, thanks to a healthy mix of high-performance products, along with strength in the gaming, large commercial, and modem units. Intel's first 10 nanometer (nm) microprocessor code-named Ice Lake remains on track to be on retail shelves by the 2019 holiday season.
However, the all-important data-centric business, which is been closely monitored by Wall Street, declined 5% on a year-over-year basis during the March period. Looking at the Data Center group a bit further, the cloud segment climbed 5%, while the communications service provider division fell 4%, and enterprise and government revenue plummeted 21%.
Regarding the chip maker's other segments, it made for a mixed reading. Memory sales were down 12% reflecting a challenging pricing environment, while the Programmable Solutions Group declined 2%. Conversely, the Internet of Things unit registered an 8% year-over-year advance, while Mobileye, which provides content for autonomous cars, saw its sales catapult to a record $209 million, up 38% year to year.
Meantime, the outlook for the June period fell short of previous expectations. Company guidance suggested that sales would be about $15.6 billion, which is a far cry from our prior $16.9 billion forecast. Furthermore, June-period non-GAAP earnings per share are likely to be about $0.89 according to management. (We had been looking for $1.01.)
That said, the back half of the year is looking to be stronger, based on Intel's guidance. The top line for the full year is forecasted to be approximately $69 billion, with share earnings dialing in at $4.35. While the aggregate top- and bottom-line figures for this year are likely to decline from 2018, the final six months are likely to be strong relative to the first-half performance.
We believe the first half of the year will prove to be a minor hiccup for Intel, during what we think is a continued up cycle. Intel stock remains a solid long-term choice, though there may be higher-than-normal price volatility over the next few weeks as the market digests what will likely be a temporary slowdown at the bottom line. Clearly, the investment community was caught off guard by the second quarter guidance and are bidding the shares lower in response.
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
