Shares of Intel (INTC) jumped on Friday after the company's results for its fourth fiscal quarter beat analysts' expectations on both the top and bottom lines. Intel also gave an upbeat outlook for its current quarter and announced a 5% dividend increase.
RESULTS AND GUIDANCE: On Thursday after the market close, Intel reported Q4 adjusted earnings per share of $1.52, beating the $1.25 analysts had predicted. Revenue of $20.2B also was above the $19.23B consensus. Intel's personal computer chip business saw sales rise 2% year-over-year in the quarter to $10B. The company's data-centric businesses posted a 15% increase in revenue.
For the current quarter, Intel expects to report adjusted EPS of $1.30 and revenue of roughly $19B, handily exceeding analysts' consensus estimates of $1.04 and $17.19B, respectively. For fiscal 2020, Intel forecast adjusted EPS of $5.00, topping analysts' estimates of $4.68, with revenue of roughly $73.5B, also ahead of the current $72.25B consensus.
In the company's earnings statement, CEO Bob Swan said: "In 2019, we gained share in an expanded addressable market that demands more performance to process, move and store data." He added that "one year into our long-term financial plan, we have outperformed our revenue and EPS expectations. Looking ahead, we are investing to win the technology inflections of the future, play a bigger role in the success of our customers and increase shareholder returns."
DIVIDEND INCREASE: Intel also increased its cash dividend by 5% to $1.32 per share on an annualized basis. It will pay a quarterly dividend of 33c per share. The dividend is payable on March 1 to shareholders of record as of February 7.
'CONSERVATIVE' GUIDANCE: Following Intel's earnings report and guidance, at least 10 analysts raised their respective price targets on the shares.
Of note, Mizuho analyst Vijay Rakesh raised his price target for Intel to $71 from $64, saying the key to 2020 will be the successful ramp of Intel's 10nm Ice Lake server as well as the recovery of supply for its PC client segment. Roth Capital analyst Suji Desilva raised his price target for Intel to $75 from $60 and said that the company's "conservative" outlook for FY20 leaves room for upside in the next few quarters. UBS analyst Timothy Arcuri raised his price target on Intel to $75, noting that the set-up on the stock remains favorable in spite of the recent run-up in price. The analyst added that while the company's outlook calls for a "sub-seasonal" performance in the second half of 2020, this is "prudent" considering supply shortages and Data Center business cloud demand seen last year, giving the guidance some "headroom" as the year progresses. Credit Suisse analyst John Pitzer raised his price target for Intel to $75 from $65, saying Intel is what he calls "The 4 U's" -- under-owned, under-valued, under-appreciated and under-estimated.
Nomura Instinet analyst David Wong raised his price target for Intel to $74 from $65 and said the company's December quarter results and March guidance reflect a "strong rebound" in the data center end market and "firmness" in the PC market. The analyst thinks Intel is continuing to establish that it is the leader in the autonomous driving chip processor market, with continuing growth in Mobileye revenues.
'HEAD SCRATCHER': Not all analysts were as positive on the company's report and guidance, however. Susquehanna analyst Christopher Rolland said that while Q4 results and Q1 guidance were "great," 2020 was a "head scratcher," with FY20 guidance implying a significant deceleration in the back half of the year. “As good as near-term [data-center group] results were, conversely, management offered equally bad 2020 full-year revenue guidance and commentary around a deceleration in cloud DCG in the back half of 2020,” he wrote. Rolland wonders whether Intel is being conservative or whether the company really does have decent visibility into a potential second-half slowdown: “Have they been told by PC OEMs and hyperscalers to expect this marked deceleration? Is this hinting toward a push out of 10-nanometer server? Is this competition weighing? Or just management’s own conservatism?” Meanwhile, Loop Capital downgraded Intel to Sell, saying that the company finished 2019 with solid performance and its Q1 guidance calls for "better than normal" seasonality, but he warns that the annual compares upside will "deteriorate quickly," with Intel's own 2020 guidance calling for just 2% growth in revenue.
Wedbush analyst Matt Bryson said Intel's guidance is either a result of management being overly conservative around future cloud spending forecasts or an acknowledgement that a combination of slowing sales and increased competition will increase pressure on Intel as the year progresses.
PRICE ACTION: In morning trading, shares of Intel are up 7% to $67.92.
Intel
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