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Bull of the Day: Intel (INTC)

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Headquartered in Santa Clara, CA, Intel (INTC - Free Report) is one of the largest chipmakers in the world. Client Computing Group (55% of 2016 revenues) and Data Center Group (29%) are their largest segments. Of late, the company has increased its presence in high growth areas like data centers, self-driving cars, artificial intelligence and the Internet of Things.

The chipmaker announced the acquisition of Israeli tech company Mobileye, which makes sensors for autonomous cars, earlier this year.

Strong Results

The company reported very strong results for Q3, beating on both the top and bottom lines and also raising the guidance for the year.

The data center, Internet of Things and memory businesses reported strong growth with record revenues.

"We executed well in the third quarter with strong results across the business, and we’re on track to a record year,” said the CEO. “Intel’s product line-up is the strongest it has ever been with more innovation on the way for artificial intelligence, autonomous driving and more.”

Shares soared more than 7% to a 17-year high.

Surging Estimates

Analysts have been raising their estimates for the company after strong results. Zacks Consensus Estimates for the current and next year have surged to $3.21 and $3.26 from $3.01 and $3.11, before the results.

The chipmaker has never missed in the last five years as you can see from the chart below:

Returning Cash to Shareholders

The company has been returning a lot of cash to shareholders in the form of dividends and buybacks. They have paid out over 100% of free cash flow over the last 10 years—about 40% via dividends and about 60% via repurchases.

During the reported quarter, they paid dividends of $1.3 billion, and used $1.1 billion to repurchase 31 million shares of stock. The stock currently has a dividend yield of 2.31%.

The Bottom-Line

Last week, it was reported by WSJ that Apple (AAPL) would not use Qualcomm chips for its iPhones and iPads, in the wake ongoing legal dispute between the two and instead use mainly Intel chips.

Earlier, Apple used only Qualcomm chips for iPhones, but started using some Intel chips starting last year. This would be another significant growth opportunity for Intel.

The stock has a Zacks Rank #1 (Strong Buy) and a VGM Score of “B”. Industry is in the top 3%. Additionally, the stock has a nice dividend yield of 2.31% and is currently trading at a reasonable valuation of 14.9 times forward earnings, even after the recent surge.

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