Semiconductor industry leader Intel (INTC – Free Intel Stock Report) has reported stellar results for the fourth quarter of last year. On point, earnings per share on a non-GAAP basis clocked in at $1.08, which was 37% above the previous-year tally of $0.79 and markedly above our $0.86 expectation. Investors ought to note that on a GAAP basis the company would have lost $0.15 a share due to an effective tax rate of 111.4%. This reflected a one-time income tax expense of $5.4 billion resulting from the U.S. corporate tax reform enacted in December. Specifically, this included a required transition tax on previously untaxed foreign earnings, which was partially offset by the re-measurement of deferred domestic taxes using the new U.S. statutory tax rate. Management forecast a tax rate of 14% for 2018, reflecting the Tax Cuts and Jobs Act.
Looking at Intel's fourth-quarter earnings story with more granularity, sales increased 4%, to $17.1 billion. This was largely due to the company's data-centric businesses that now account for nearly half of its top line. This is vital for the chip behemoth, as its bread-and-butter personal computer unit is mature and results have been declining for quite some time. Further, we see that most of the company's data-centric businesses performed well for the December period. In fact, the Data Center Group, Internet of Things Group, and Programmable Solutions Group all registered record sales for the period. While the PC-centric group declined 2% year over year, the data-center divisions climbed 21%.
Meantime, Intel gave promising news for the March quarter and for full-year 2018. Specifically, it looks for revenues of about $15 billion for the March quarter, with share net dialing in at $0.70 on a non-GAAP basis. For all of 2018, the company looks for revenue of $65 billion, plus or minus a few hundred million, and earnings per share of $3.55. We are on board with the company and believe that these expectations can be attained, assuming the economy remains on an upward trend.
Based on recent earnings trends at Intel, we believe the company is firmly positioned in the higher-growth segments of the chip market. For quite some time, there were concerns that Intel would fall behind, given its significant exposure to the mature PC market. However, management has done a solid job of garnering share in the fast growing data-centric segments of the market. The company has achieved this through organic growth and via acquisitions. We see ample room for growth, particularly in the autonomous car market, which Intel has a solid position in thanks to its relatively recent purchase of MobileEye. What's more, the industry behemoth has the size and finances to augment its presence further in more-lucrative segments in the years ahead. A likely growing dividend is also a plus for income-oriented accounts and also provides support during an industry downturn. On point, the company was kind to its stockholders, as it increased its quarterly dividend by 10%, to $0.30 a share. The investment community is cheering the strong earnings results and dividend hike, as Intel shares were trading nicely higher as the market opened.
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.
