AMD Q1 Earnings to Gain From GPU Product Rollouts & Deal Wins

Zacks Equity Research

Advanced Micro Devices Inc AMD is set to report first-quarter 2019 results on Apr 30. Notably, the company surpassed the Zacks Consensus Estimate for earnings in three the trailing four quarters, with an average positive earnings surprise of 6.9%.

Past-Quarter Performance

AMD had delivered fourth-quarter 2018 non-GAAP earnings of 8 cents per share which missed the Zacks Consensus Estimate by a penny. However, the bottom line was up by 7 cents from the year-ago period.

Revenues increased 6% year over year to $1.42 billion but lagged the Zacks Consensus Estimate of $1.44 billion.

Notably, AMD’s stock has returned 157.8% in the past one year, outperforming the industry’s rallyof 26.7%.

Let’s see how things are shaping up prior to this announcement.

Factors at Play

AMD is leaving no stone unturned to strengthen its GPU portfolio with new capabilities in a bid to provide gamers with superior graphic performance and high-quality visual experiences. These initiatives are likely to aid the to-be-reported quarter.

Notably, the company unveiled its new Radeon Software Adrenalin 2019 Edition at CES 2019. This updated version will be based on the AMD RadeonGPUs and feature the WattMan technology.

AMD also launched the much-awaited next generation 7-nanometer (nm) Radeon Vega GPU, AMD Radeon VII. We believe AMD’s portfolio strength will help in expanding customer base and boost the company’s top line in the first quarter.

Additionally, with the latest Google Stadia win, we believe AMD is well poised to capitalize on the growing cloud gaming domain with major hyperscale cloud service providers (CSPs) like Microsoft and, Amazon. We believe this move can be a game changer for AMD as it provides the company considerable exposure in the rapidly evolving cloud gaming market. This in turn is likely to positively impact the to-be-reported quarterly results.

These launches are likely to provide AMD an edge against the likes of NVIDIA NVDA and Intel. With these products, AMD is foraying into the high-end graphics card market. Consequently, AMD’s revenues will benefit significantly if the latest GPU can cater to the rising demand of users, which in turn will aid the first-quarter results.

Moreover, strong adoption of EPYC server processors is another catalyst. Notably, increasing adoption of AI techniques and ML tools in industries like gaming, automotive and blockchain are primarily responsible for driving GPU demand. The first-quarter results are likely to benefit from this demand, with the company launching new graphics cards.

The Zacks Consensus Estimate for first-quarter earnings is pegged at 5 cents per share, unchanged for the last 30 days. The Zacks Consensus Estimate for revenues stands at $1.26 billion, suggesting a decline of 23.8% from the year-ago reported figure.

What the Zacks Model Unveils

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.

AMD has a Zacks Rank #3 and an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks with Favorable Combination

Here are a few stocks that are worth considering as our model shows that these have the right combination of elements to deliver an earnings beat in the upcoming releases.

Xilinx, Inc. XLNX has an Earnings ESP of +2.03% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Lockheed Martin Corporation LMT has an Earnings ESP of +2.05% and a Zacks Rank #2.

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Lockheed Martin Corporation (LMT) : Free Stock Analysis Report
 
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