Looking at Intel Corporation’s (NASDAQ:INTC) earnings update in December 2018, analyst forecasts appear to be bearish, as a -6.9% fall in profits is expected in the upcoming year relative to the past 5-year average growth rate of 8.3%. With trailing-twelve-month net income at current levels of US$21b, the consensus growth rate suggests that earnings will decline to US$20b by 2020. I will provide a brief commentary around the figures and analyst expectations in the near term. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.
How is Intel going to perform in the near future?
The view from 34 analysts over the next three years is one of negative sentiment. Since forecasting becomes more difficult further into the future, broker analysts generally project out to around three years. I’ve plotted out each year’s earnings expectations and inserted a line of best fit to calculate an annual growth rate from the slope in order to understand the overall trajectory of INTC’s earnings growth over these next few years.
By 2022, INTC’s earnings should reach US$21b, from current levels of US$21b, resulting in an annual growth rate of -1.5%. However, if we exclude extraordinary items from earnings, we see that the profits is predicted to rise over time, resulting in an EPS of $4.96 in the final year of forecast compared to the current $4.57 EPS today. The primary reason for earnings contraction is due to top-line expansion of 2.4%, which is predicted to lag cost growth leading up to 2022. With this high cost growth, margins is expected to contract from 30% to 27% by the end of 2022.
Future outlook is only one aspect when you’re building an investment case for a stock. For Intel, there are three important aspects you should look at:
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Valuation: What is Intel worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether Intel is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Intel? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.