Intel Up on Raised Sales Outlook, Dividend Hike
The world’s largest manufacturer of semiconductor products, Intel Corp.’s (INTC) share price shot up nearly 5% to $35.95 after the chipmaker provided an improved sales guidance for fiscal 2015 and also announced a dividend hike at its annual investor meeting. The increase in share price was the highest since 2001.
2015 Outlook
Intel initiated guidance for 2015. It projects sales to grow in the mid-single digits, gross margin to be about 62% (+/- 2 percentage points) and research & development plus MG&A spending of approximately $20 billion. Capital spending is expected to be around $10.5 billion, down from $11 billion projected for 2014.
Analysts had projected sales growth of 3%.
Dividend Hike
The board of directors of Intel approved a 6.7% hike in its annual dividend. The new dividend comes to 96 cents per share, up from the last payout of 90 cents. The increased dividend will be paid beginning with the dividend that will be announced in the first quarter of 2015.
The strength of Intel’s business model is reflected in its strong cash generation capabilities and commitment to return value to shareholders. We believe that the continued increase in dividends will inspire investors’ loyalty as a result of higher returns from the stock.
Why the Optimism?
According to the latest IDC and Gartner reports, the decline in PC shipments will continue to moderate, helped by increased spending in mature markets as a result of system refreshes and enterprise system migrations beyond Microsoft's (MSFT) XP operating system.
Therefore, continued stabilization in Intel’s core PC market could have driven the optimistic projection. Sales of PC processors to enterprises are also growing, which is particularly encouraging because that is most important revenue source for the chipmaker. Moreover, its growing position at new form factors (notebooks, 2-in-1s, tablets), new innovative products such as the Grantley platform and progress at the 14nm process are all positives.
Moreover, Intel’s strength in the data center and stabilization in the PC market provide the necessary resources for a very aggressive push to gain share in mobile. So the company continues to sink billions into the market to induce manufacturers to use its chips.
Intel shares currently hold a Zacks Rank #2 (Buy). Investors interested in the industry may also consider stocks like NVIDIA Corp. (NVDA) and Texas Instruments Inc. (TXN), both carrying the same rank as Intel.
Read the Full Research Report on INTC
Read the Full Research Report on TXN
Read the Full Research Report on MSFT
Read the Full Research Report on NVDA
Zacks Investment Research
