Intel Corp. (INTC - Analyst Report) is set to report first quarter 2013 results on Apr 16. Last quarter it posted a 6.67% positive surprise. Let’s see how things are shaping up for this announcement.
Growth Factors t\This Past Quarter
Intel primarily sells chips, which are used in notebooks, netbooks and desktop computers. The transition to tablets and mobile devices has led to lower PC sales, which impacted the company’s results through 2012. We do not expect the personal computer market to return to normal growth rates any time soon.
This is quite evident from the data released last week by U.S. market research firm IDC. Per the data, first-quarter shipments of PCs fell 14% worldwide from last year, the steepest quarterly drop since 1994. Gartneralso pegged a decline of 11% for the same time period.
Therefore, with the changing dynamics, Intel has to increase efforts to move beyond the computer market. The company’s focus on producing chips for mobile Internet applications will likely account for most of Intel’s growth in the coming years. Also, the company’s focus on its fourth-generation core processors and new processors, which will be used to power ultrabooks and hybrid tablets might bring a sigh of relief in the latter half of the year.
Also, Intel’s plan for a TV service is a new step for the chip maker. But competition will remain fierce in this segment as many media firms as well as technology companies such as Apple (AAPL - Analyst Report), Microsoft (MSFT - Analyst Report) and Google(GOOG) are all vying for a share of the pie.
Our proven model does not conclusively show that Intel is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP (Read: Zacks Earnings ESP: A Better Method and a Zacks Rank #1, #2 or #3 for this to happen. That is not the case here as you will see below.
Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 42 cents. Hence, the difference is 0.00%.
Zacks Rank #3 (Hold): Intel’s Zacks Rank #3 (Hold) lowers the predictive power of ESP because the Zacks Rank #3 when combined with a ESP of 0.00% makes surprise prediction difficult. We caution against stocks with Zacks Ranks #4 and #5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Other Stocks to Consider
Here are some other companies you may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:
Netflix Inc. (NFLX - Analyst Report), Earnings ESP of +5.56% and Zacks Rank #1 (Strong Buy)
Amazon.com (AMZN - Analyst Report), Earnings ESP of +190.0% and Zacks Rank #3 (Hold)