We expect semiconductor company Intel Corp. (INTC) to beat expectations when it reports second-quarter 2014 results on Jul 15.

Why a Likely Positive Surprise?

Our proven model shows that Intel is likely to beat earnings because it has the right combination of two key ingredients.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +1.92%. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.

Zacks Rank: Intel sports a Zacks Rank #1 (Strong Buy). Note that stocks with a Zacks Rank #1, 2 or 3 have a significantly higher chance of beating earnings estimates. The Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.

The combination of Intel’s Zacks Rank #1 and a +1.92% ESP makes us reasonably confident in looking for a positive earnings beat.

What is Driving the Better-than-Expected Earnings?

Intel’s new products, process lead 14-nanometer (nm) technology, its strong position in emerging markets, solid execution and cost control measures are expected to generate a positive earnings surprise in the upcoming quarter.

Additionally, the optimism surrounding the stock can be attributed to stabilization in the PC market. Sales of PC processors to enterprises are growing, which forms the major revenue source for the chipmaker. Therefore, Intel is well positioned to gain from this PC stabilization, whether customers opt for the all-new Windows 8 or Google’s chromebook.

Also, Intel’s focus on the mobile segment, wearables, the Internet of Things, growth in data centers and new offerings should help drive growth. The positive trend is seen in the trailing four-quarter average surprise of 1.93%.

Other Stocks to Consider

Intel is not the only firm looking up this earnings season. We also expect earnings beats from the following companies:

Gentex Corp. (GNTX), with an ESP of +2.08% and a Zacks Rank #1.

AmSurg Corp. (AMSG), with an Earnings ESP of +3.13% and a Zacks Rank #1.

Kirby Corporation (KEX), with an Earnings ESP of +3.10% and a Zacks Rank #1.

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Read the Full Research Report on AMSG
Read the Full Research Report on GNTX
Read the Full Research Report on KEX


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