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Market Update

Earnings on Tap: Intel

Despite some headwinds, Intel looks well-set to tap opportunities in the fast-changing industry over the long term

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Tech giant  Intel (INTC) is scheduled to reveal first-quarter results Tuesday after the bell. Wall Street analysts are expecting earnings to come in lower at $0.42 per share compared with $0.53 per diluted share reported in the corresponding period a year earlier.

The world's largest manufacturer of semiconductors is facing shrinking market share as consumers worldwide are increasingly preferring smartphones and tablets over personal computers. According to the International Data Corporation, unit sales of personal computers posted an unexpected 14% drop year over year, marking the largest decline in nearly two decades.

As a result of similar trends at the end of last year, Intel's fourth quarter came in sharply lower. The company reported net income of $2.5 billion or $0.48 per share, a slide of 27% from $3.4 billion reported in the preceding year.

Morningstar analyst Andy Ng believes the biggest obstacle facing Intel is the maturation of the PC market, which could pose challenges for growth. Nevertheless, the mass proliferation of mobile devices and tablets will ultimately benefit Intel, opines Ng.

As adoption of tablets and other mobile devices continues to rise, it will require substantial server build-outs to create the infrastructure necessary for the cloud. This will provide significant long-term tailwinds for the growth of Intel's server processor segment, which is the firm's most lucrative business, explains Ng.

The stock is up about 3.5% on a year-to-date basis but is still trading below Morningstar's fair value estimate.

Gazala Parveen does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.