Intel Corporation

 

Intel Inside? Intel is another 800 lb gorilla in the room, dominating CPUs for computers.  Everyone is worried that Intel will lose its competitive edge from its proprietary x86 architecture (AMD has the rights to x86) to companies that use ARM based architecture.  Intel is not standing still, continually driving for smaller and more energy efficient architecture.  Intel has made some missteps with its acquisition of McAfee as it aspired to implement security deeper into its chips and software.  Last year Intel acquired Altera, a manufacturer of FPGAs (Field-Programmable Gate Array) – chips that can be programmed by its customers.  More recently Intel made a splash by agreeing to purchase Mobileye for $15 billion (its FY16 operating cash flow was almost $22 billion so it's not a huge financial commitment for Intel) to extend its computer brains into the nascent autonomous driving market which will likely power the first and subsequent lines of Terminators.  Let's make money today on the future extinction of our race.  Intel is valued at about 12X FY17 EPS estimates, it has a strong balance sheet that has a small amount of net debt, its cash flow is strong.  Importantly, Intel’s history has been to operate with a degree of heightened paranoia because it may face its demise any day.  Perhaps it might come with the Terminators. 

 

Ests:    3Q17   4Q17   FY17    FY18

Revs    15.7     16.1     61.4     63.1

EPS      .80       .83       3.01     3.10

 

P=41.35, Div=1.09, yield=3.1%, Gross cash+inv 27bn, ~4bn net debt, TTM EPS 3.18, P/E=13X

 

3Q17   1.01 vs .80, incl ~.13 in investment gains, est .80 up from .74

  • Revs ex McAfee +6% to 16.1bn, Client Computing flat, Data Center +7%, IoT +23%, Memory +37%, Programmable +10%
  • GM 63.9% vs 64.8%, OM 31.7% vs 28.3%, Segment OpInc +14.6%
  • Closed Mobileye acquisition 4 months early, YTD has won 14 Advanced Driver Assistance Systems wins with 14 auto manufacturers vs 12 for all of last year.
  • FY17 Guidance: Revs 62bn, EPS 3.25 (est 3.01), 4Q Revs 16.3b, EPS .86 (est .83)

2Q 17.72 vs .59, est was .68 up from .64

  • Revs ex Intel Security +14% to 14.8bn, Client Computing +12%, Data Center +9%,
  • GM 63% vs 61.8%, OM 28.4% vs 23.7%, OpInc +30%
  • Expect to complete Mobileye transaction in 3Q
  • Outlook: 3Q Revs 15.7bn, EPS .80 (est .74), Raised FY revs by 1.3bn to 61.3bn, EPS by .15 to 3.00

1Q 17.66 vs .54, est and guidance was .65

  • Revs +8% to 14.8bn, solid growth across all segments except for Security, -1%
  • GM 63.2% vs 62.7%, OM 26.4% vs 23.9%, OpInc +20% to to 3.9bn
  • Operating leverage driven by higher ASPs and lower platform unit costs
  • Guidance: 2Q Revs 14.4bn +/- 0.5bn, GM 63%, EPS .68 +/- .05 (vs .59, est .64) FY Raised slightly, Revs 60bn, GM 63%, EPS 2.85 +/- 5% (prev 2.80 vs 2.72), CapEx 12bn +/- 0.5bn
  • Solid quarter, making good moves expanding into other markets, solid balance sheet, attractively valued at 13X earnings, driving cost efficiencies, goal to get spending to 30% of revs by 2020 (FY17 Guidance is 34%, implies >15% operating income growth on FY17 Rev levels)