On Jan. 24, chip giant Intel (INTC 3.93%) is set to report its financial results for the fourth quarter of 2018 and, as a corollary, the full year. The company is also likely to provide financial guidance for the entirety of 2019, although, as we saw over the course of 2018, such guidance can be subject to significant change. (Intel is on track to generate far more revenue and earnings per share than its original guidance for 2018 suggested.)
Here, I'd like to go over three things that investors should keep an eye on when the company reports its results.
Image source: Intel.
Full-year 2019 guidance
One thing that'll likely matter a great deal to investors is the guidance that the company issues for 2019. If Intel's guidance is higher than what the analyst community expects, then this could push the shares higher. Conversely, if Intel misses expectations on that front, the shares could come under pressure.
For the entirety of 2019, analysts aren't expecting a repeat of 2018, during which they, on average, expect the company to see revenue grow 13.4% and EPS rise almost 31% to $71.2 billion and $4.53, respectively -- essentially matching Intel's own financial guidance. Instead, they're calling for revenue to rise at a more modest 3% clip and for EPS to grow by less than 1% to $73.34 billion and $4.57, respectively.
It's worth noting that Intel CFO and interim CEO Bob Swan said on the company's Oct. 25 earnings conference call that "[as] we look forward to 2019, we expect to deliver another record year for the company." (Keep in mind that this would technically be true if Intel grew revenue and EPS by token amounts.)
A new CEO?
As of this writing, Intel has gone just shy of seven months without a CEO following the resignation of Brian Krzanich back on June 21. In a recent report, Bloomberg claimed that Intel's board of directors is looking to wrap up the search before the earnings date, but that's hardly a guarantee that Intel will actually have a new CEO by the time earnings comes around on Jan. 24.
In the event that Intel does ultimately have a new permanent CEO by that time, I'd be interested in hearing the new CEO's vision and strategy for the company. Of course, the amount of time that a new CEO would have to articulate those things on a one-hour conference call would be limited, but it'd be a good precursor to a more elaborate financial analyst day. (Intel didn't host a financial analyst day in 2018, so such an event seems long overdue.)
Capital expenditure outlook
Intel was upfront about the fact that it expected to be supply constrained during the fourth quarter of 2018. There have also been some signs that this state of affairs could continue into 2019.
Indeed, back in November 2018, the CEO of ASUSTEK Computer -- a major PC maker that relies heavily on Intel for processor supply -- said that the company "believe[s] that this [shortage] will not be resolved before Q2 of next year. Perhaps it will be resolved in Q3 of next year."
So, what I'd like to hear from Intel is an update on when it expects that situation to be resolved. And, on a related note, I'm looking forward to seeing what the company's capital expenditure (capex) budget -- an indication of how much it's investing in manufacturing capacity -- is expected to be in 2019.
For reference, Intel's most recently issued guidance for 2018 capex was $15.5 billion -- up significantly from its plan at the beginning of the year of $14 billion (give or take $500 million). Intel also reduced its memory capex by $500 million in the process, indicating an even bigger bump to logic-related capex (logic refers to chips like the company's microprocessors) than the consolidated capex increase would suggest.
Referring back to Swan's comments on the Oct. 25 earnings call, the executive said that "as we think into 2019, we expect logic capex to likely be a little higher, and memory capex, despite building self-sufficiency on Optane, to be a little bit lower."
We should get more concrete figures on Jan. 24 -- as well as, potentially, some insight into the drivers of that capex number.
Check out the latest Intel earnings call transcript.
