Intel (INTC) to Post Q4 Earnings: DCG & CCG in Spotlight

Zacks Equity Research

Intel INTC is scheduled to report fourth-quarter 2019 results on Jan 23.

The chipmaker’s fourth-quarter top line is expected to have benefited from solid momentum of its latest high-performance Xeon processors. Growing adoption of IoT applications are also expected to have served as an upside.

Nonetheless, softness in the PC-centric business might have made a negative impact on fourth-quarter performance.

Click here to know how the company’s overall fourth-quarter performance is expected to be.

Data-Centric Business in Focus

Intel’s data-centric business model primarily comprises the Data Center Group (“DCG”), Internet of Things Group (“IOTG”), Non-Volatile Memory Solutions (“NSG”), Programmable Solutions Group (“PSG”) and other business units.

Markedly, the company’s fourth-quarter performance is expected to have benefited from advancements in DCG. The unit has been gaining from growing clout of high-performance Cascade Lake family of Xeon processors integrated with deep learning tools to accelerate AI processes.

Further, the processors are integrated with Intel’s Optane DC Persistent Memory solution, which is witnessing rapid adoption. Markedly, Intel’s Optane DC Persistent Memory modules are being leveraged by the likes of Oracle ORCL, SAP, Alphabet’s GOOGL Google, Microsoft MSFT, Baidu and Alibaba.

Additionally, higher demand from communication service providers and growing adoption of cloud-based solutions are likely to continue driving the data center business.

Markedly, the Zacks Consensus Estimate for DCG’s fourth-quarter revenues is currently at $6.374 billion, indicating a rise of nearly 5% from the year-ago quarter’s figure.

Talking about IoT businesses, Mobileye’s new design wins and increasing proliferation of IoT across transportation and retail application are anticipated to have contributed to Intel’s fourth-quarter top line.

Additionally, the company’s non-volatile memory business is expected to have gained from 3D XPoint technology. The Zacks Consensus Estimate for NSG revenues is currently pegged at $1,300 million, which indicates year-over-year increase of 17.4%.

However, the PSG segment is expected to report a decline in the fourth quarter. The Zacks Consensus Estimate for PSG revenues is currently pegged at $565 million, calling for year-over-year decline of 7.7%. Lower enterprise demand might have dented the unit’s performance.

Intel Corporation Price and Consensus

 

Intel Corporation Price and Consensus

Intel Corporation price-consensus-chart | Intel Corporation Quote

 

Headwinds in Client Computing Unit is a Worry

Sluggish platform volumes and PC units are likely to have exerted pressure on Intel’s Client Computing Group (CCG) in the to-be-reported quarter. In fact, management anticipates the PC centric part of the business to be flat to marginally down for the quarter in review.

Markedly, the Zacks Consensus Estimate for CCG is pegged at $9.718 billion that indicates a drop of almost 1% from the year-ago quarter’s reported figure.

Nonetheless, incremental adoption of the latest processors and improving trend in PC shipments are likely to have provided some respite to the unit’s performance.

Zacks Rank

Currently, Intel carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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