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Factors Likely to Impact Advanced Micro's (AMD) Q2 Earnings

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Advanced Micro Devices, Inc. (AMD - Free Report) is slated to report second-quarter fiscal 2018 results on Jul 25 after the closing bell. Notably, the company has a positive record of earnings surprises in three of the trailing four quarters, with an average beat of 35.7%. In the last reported quarter, the company delivered a positive earnings surprise of 22.2%.

In the last reported quarter, the company delivered non-GAAP earnings of 11 cents per share compared with break-even reported in the year-ago quarter. The figure also surpassed the Zacks Consensus Estimate of 9 cents per share.

Revenues surged 40% year over year to $1.65 billion and exceeded the Zacks Consensus Estimate of $1.52 billion. The accelerated adoption of the company’s products in the PC, gaming and data center industries primarily led to its impressive performance.

Notably, the stock has returned 16.5% in the last year, against the industry’s loss of 7.3%.

What to Expect?

For second-quarter 2018, management expects revenues to be roughly $1.725 billion (+/-$50 million). The Zacks Consensus Estimate for revenues is pegged at $1.72 billion. The company is anticipated to witness its bottom-line expand from an in-line earnings to reach 12 cents per share.

Factors to Consider

Gaming PC & GPU Product Rollouts: Key Catalyst

AMD’s presentation at Computex, wowed some gamers, DIY PC enthusiasts and investors. The company introduced and gave the first public demonstration of its next generation CPUs and GPUs.

The chipmaker exhibited its new 7nm AMD Radeon Vega GPU products, which are set to launch at some point in 2018. AMD also showcased second generation Threadripper CPU powered by Ryzen technology. 12nm Zen+ architecture will support the Ryzen second generation based Threadripper 2. The chip features a whopping 32 cores and 64 threads, per PC Gamer.

All of these new releases should aid AMD compete against the likes of Intel and NVIDIA (NVDA - Free Report) . Robust performance of the company’s GPU products recorded under its Computing and Graphics segment are expected to drive results.  Increasing adoption of artificial intelligence (AI) techniques and machine learning tools in industries like gaming, automotive and blockchain are primarily responsible for driving GPU demand.

Notably, AMD reports GPU sales under Computing and Graphics segment, which recorded revenues of $1.12 billion in the first quarter of 2018, up 95% from the year-ago quarter. The increase can be attributed to accelerated sales of Radeon graphics and Ryzen desktop processors. AMD is anticipated to keep on gaining from this growing demand. The Zacks Consensus Estimate for Computing and Graphics segment is currently pegged at $1.119 billion.This segment is anticipated to boost total revenues in the to-be reported quarter.

Expanding Customer Base & Partnerships Bodes Well

AMD recently discussed its Tencentcloud services partnership for its EPYC processors. Furthermore, AMD announced that its AMD EPYC 7000 series processor will power Hewlett Packard Enterprise’s ProLiant DL325 Gen10 server.

In another impressive partnership, AMD touched on details about its first Cisco UCS server platform. One of AMD’s more easily accessible deals will see the chipmaker help bring ultrawide 4K gaming to Samsung big screen TVs. These contracts are helping AMD rapidly penetrate the server market.

AMD and Microsoft had also collaborated for providing support to Radeon FreeSync technology in Microsoft’s Xbox One S and Xbox One X consoles.

Further, Dell EMC launched “three new PowerEdge platforms powered by AMD EPYC 7000 series server processors.”

Yahoo Japan Corporation and Packet were added to its list of clients. Additionally, Cray announced the addition of “EPYC processors to its Cray CS500 line of HPC offerings.”

The release and partnerships is a tailwind for the company.

What the Zacks Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.

Advanced Micro has a Zacks Rank #2 and an Earnings ESP of +2.45%. This indicates that the company is likely to beat estimates. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Other Stocks to Consider

Here are some other stocks, which you may consider as our model shows that these too have the right combination of elements to post an earnings beat in its upcoming release:

Hubbell Inc (HUBB - Free Report) has an Earnings ESP of +1.97% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Texas Instruments Incorporated (TXN - Free Report) has an Earnings ESP of +0.96% and a Zacks Rank #2.

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