The new earnings season gears up this week.
Among those stepping into the earnings spotlight are rival semiconductor companies Advanced Micro Devices (NYSE: INTC).
While the former responded to the softening PC market in 2012 and 2013 by focusing on game consoles, Intel has been buoyed by strong data center business. But both companies are expected to benefit from the recent resurgence in the PC market.
Analysts on average predict that AMD will report Thursday after the closing bell that its revenue for the quarter increased almost 24 percent year-over-year to $1.44 billion. Earnings of just $0.02 per share are also in the consensus forecast, but that compares to a reported net loss of $0.09 per share in the comparable period of last year.
Intel reports Tuesday after the markets close, and the consensus forecast calls for its revenue to be less than seven percent higher than a year ago to $5.64 billion. However, per-shares earnings of $0.52 are expected. That would be up 25 percent from in the second quarter of last year.
AMD has not fallen short of consensus EPS estimates in the past four quarters, but the current estimate has ticked down by a penny in the past 60 days. Intel's EPS estimate has risen in that time from $0.47. But its earnings did fall short of expectations in two of the previous four quarters, though only about a penny per share.
Looking ahead to the current quarter, sequential and year-over-year growth on both the top and bottom lines are so far anticipated from AMD. Analysts predict sequential gains for Intel too, but a narrow decline in EPS on a year-on-year basis.
See also: Advanced Micro Devices Reshuffle: Not Just 'Rearranging The Deck Chairs'
AMD's market cap of $3.3 billion compares to more than $155 billion for Intel, which is a component of both the Dow Jones Industrial Average and the S&P 500. Both are headquartered in California, AMD in Sunnyvale and Intel in Santa Clara, and they were each founded in the late 1960s.
Other competitors include Texas Instruments, which is expected to post essentially flat EPS and marginal revenue growth for the second quarter, and NVIDIA, from which analysts are looking for double-digit growth on the top and bottom lines for the current period.
During the three months that ended in June, AMD launched "the world's fastest graphics card" and announced a reorganization that included the appointment of a new chief operating officer. Intel appointed a new chief marketing officer and it released preliminary second-quarter results due to strong business PC demand.
See also: Semiconductor ETFs Are This Year's Technology Titans
AMD has a long-term EPS growth forecast of about 37 percent, but its price-to-earnings (P/E) ratio of 91 is greater than the industry average. Intel, on the other hand, has a long-term EPS growth forecast of less than seven percent, but its 16 P/E ratio is less than the industry average. When it comes to return on equity and operating margin, Intel has the advantage, at almost 17 percent and 24 percent, respectively. For AMD, the return on equity is less than 10 percent and operating margin less than four percent.
Intel has a 3.0 percent dividend as well. AMD does not offer a dividend. But AMD has a higher level of short interest -- more than 14 percent of the float compared to Intel's less than four percent.
Analysts surveyed by Thomson/First Call recommend holding shares of both stocks. That has been the consensus recommendation for at least three months in both cases. They see marginal potential upside in AMD, but the share price of Intel has outrun its mean price target. Of course, positive earnings surprises or rosy guidance may prompt raises individual price targets on either stock.
As of the close on Friday, AMD's share price was up around 14 percent year to date, while Intel's was more than 20 percent higher. Intel hit a new multiyear high on Friday. Over the past six months, Intel has outperformed not only AMD but also Qualcomm and Texas Instruments. Both AMD and Intel have outperformed the S&P 500 in that time.
At the time of this writing, the author had no position in the mentioned equities.
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