Intel (NASDAQ:INTC) is set to report FQ1 2014 earnings after the market closes on Tuesday, April 15th. Intel is the largest American semiconductor producer by revenue and the manufacturer of most chips found in PCs. PC sales have been flat over the past 5 years as most semiconductor industry expansion has come from increased sales in both smartphones and tablet devices. CEO Brian Krzanich was appointed in May and is attempting to steer Intel toward wearable devices chips and cloud computing data centers. This quarter Wall Street is expecting slightly less EPS than FQ1 last year and year-over-year revenue is expected to grow by only 1.9%. Here's what investors expect from Intel Tuesday.
The current Wall Street consensus expectation is for Intel to report 37c EPS and $12.819B revenue, while the current Estimize.com consensus from 56 Buy Side and Independent contributing analysts is 39c EPS and $12.862B in revenue. This quarter the buy-side as represented by the Estimize.com community is expecting Intel to beat the Wall Street consensus on both EPS and revenue by a small margin.
By tapping into a wider range of contributors including hedge-fund analysts, asset managers, independent research shops, students, and non-professional investors Estimize has created a data set that is more accurate than Wall Street up to 69.5% of the time, but more importantly it does a better job of representing the market's actual expectations. It has been confirmed by Deutsche Bank Quant. Research and an independent academic study from Rice University that stock prices tend to react with a more strongly associated degree to the expectation benchmark from Estimize than from the Wall Street consensus.
The magnitude of the difference between the Wall Street and Estimize consensus numbers often identifies opportunities to take advantage of expectations that may not have been priced into the market. In this case we are seeing an average differential between the two groups' expectations.(click to enlarge)
The distribution of estimates published by analysts on the Estimize.com platform range from 34c to 46c EPS and from $12.500B to $13.164B in revenues. This quarter we're seeing a wider distribution of estimates on Intel.
The size of the distribution of estimates relative to previous quarters often signals whether or not the market is confident that it has priced in the expected earnings already. A wider distribution of estimates signaling less agreement in the market, which could mean greater volatility post earnings. (click to enlarge)
Over the past 4 months the Wall Street EPS consensus fell from 41c to 37c, while the Estimize consensus dropped from 45c to 39c. Meanwhile the Wall Street revenue consensus rose from $12.766B to $12.819B, while the Estimize forecast converged declining from $12.994B to $12.862B. Timeliness is correlated with accuracy and the delta between Wall Street and the Estimize community was shrinking at the end of the quarter.
The analyst with the highest estimate confidence rating this quarter is WallStreetBean, who projects 38c EPS and $12.844B in revenue. WallStreetBean is ranked 10th overall among over 4,000 contributing analysts. WallStreetBean is also ranked 58th in the Spring 2014 season which began last week. Estimate confidence ratings are calculated through algorithms developed by deep quantitative research which looks at correlations between analyst track records and tendencies as they relate to future accuracy. In this case, WallStreetBean is expecting Intel to beat Wall Street's estimates but fail to live up to the consensus of the Estimize community.
Intel's transition toward cloud computing and wearable device chips may take some time, the consensus around Intel is uninspiring this quarter. Wall Street expects Intel to report slightly lower EPS than last year and only marginally higher revenue. Contributing analysts on the Estimize.com platform have slightly higher expectations and believe Intel will beat the Street's consensus on both EPS and revenue by a tiny margin.