The semiconductor industry is a massive and important part of the technological world. However, the segment rarely occupies a big part of investor portfolios.
This is unfortunate as many semiconductor stocks have been beating earnings estimates as of late, while several appear poised to outperform the market in the coming months as well. One such company that is not only the king of its industry but could be well-positioned for gains is Intel.
I’m sure most investors are familiar with this chip behemoth, but what many might not know is that the company is a very interesting choice in today’s rocky market. Let’s take a closer look at some of the recent trends in this company below, and what makes this stock such an intriguing pick right now:
Intel Corporation (INTC - Analyst Report) is a veteran when it comes to the semiconductor business, while it is in a very strong position as well, making this stock a must buy for your portfolio in the short run as well as the long run.
Additionally, Intel has been active on the M&A front, as it just acquired the Axxia Networking Business from Avago Technologies (AVGO - Analyst Report) for $640 million furthering its aim to become a global leader in network infrastructure.
Financials Are Strong
In Intel’s most recent earnings release, INTC reported second quarter revenue of $13.8 billion, operating income of $3.8 billion, and EPS of $.55 beating the Zacks Consensus Estimate by 5.77%. The company generated approximately $5.5 billion in cash from operations, paid dividends of $1.1 billion, and used $2.1 billion to repurchase 74 million shares of stock.
Q2 Business Trends
INTC has seen solid sales in a number of its business segments. The PC Client Group revenue came in at $8.7 billion, up 9 percent sequentially and up 6 percent year-over-year. Meanwhile, Data Center Group revenue was at $3.5 billion, up 14 percent sequentially and up 19 percent year-over-year. And the relatively small Internet of Things Group revenue was at $539 million, up 12 percent sequentially and up 24 percent year-over-year.
However it wasn’t all great news for INTC as some divisions have struggled, though fortunately these are smaller segments for the company. Mobile and Communications Group revenue of $51 million, down 67 percent sequentially and down 83 percent year-over-year, while Software and services operating segments revenue was at $548 million, down 1 percent sequentially but up 3 percent year-over-year.
Investor Incentives on the rise
Intel announced that it intends to return more cash to shareholders by lowering its cash balance, and the board of directors authorized an increase of $20 billion to its share repurchase program. They forecast share repurchases of approximately $4 billion in the third quarter, with additional share repurchases in the fourth quarter.
"This change in our capital structure is the continuation of a multi-year focus on creating value and returning cash to our shareholders, and reinforces our confidence in the business," said Stacy J. Smith, Intel CFO and executive vice president.
Analysis and Bottom Line
We have Intel in the Semi-General Industry and we rank the industry to be in the top 6% of all industries. We also have Intel as a Zacks Rank #1 (Strong Buy) thanks to their great earnings picture and strong earnings estimate revision activity. In fact, in just the past month, 17 estimates have moved higher for the current year forecast, while not a single one has been revised lower for the same time frame.
Over the past year, Intel has had an average surprise of reported earnings of 4% indicating steady positive earnings beats for the near future, and that INTC does a great job in managing expectations. So, if you are looking for a stock to offer up solid returns in the short run, as well as gains over the long haul, Intel is definitely a stock you should consider for your portfolio.
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