Which Chip Stock is the Best Earnings Trends Winner?

Earnings trends are extremely important when evaluating stocks. At Wall St. Cheat Sheet, we view increasing earnings quarter-over-quarter as a simple way to gauge whether costs and the business model are stable. Then we like to analyze whether the company is outperforming peers in the sector. This is what we call the “E-Squared” investment analysis (‘E = Earnings Are Increasing Quarter-Over-Quarter’ + ‘E = Excellent Relative Performance Versus Peers and Sector’).

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Here’s your Cheat Sheet to how the top 5 chip stocks rank via earnings trends:

Applied Materials Inc. (NASDAQ:AMAT): Current Price $13.74

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 8,129 5,014 9,549 10,520 8,719
Diluted EPS ($) 0.70 -0.23 0.70 1.45 0.09

We note that Applied Materials has had a rather indifferent year 2012, with both revenue and EPS, particularly the latter, falling sharply.

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Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Jan. 31, 2012 Apr. 30, 2012 Jul. 31, 2012 Oct. 31, 2012 Jan. 31, 2013
Revenue ($) in millions 2,189 2,541 2,343 1,646 1,573
Diluted EPS ($) 0.09 0.22 0.17 -0.39 0.03

Between April 2012 and January 2013, we note that revenue is down by almost 40%, and that EPS slammed into the negative in October 2012. Though EPS clawed back into the black in the latest quarter, these are uninspiring numbers, and we’ll drop Applied Materials from the list…

Intel (NASDAQ:INTC): Current Price $21.115

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 37,590 35,130 43,620 54,000 53,340
Diluted EPS ($) 0.92 0.77 2.01 2.39 2.13

Revenue grew steadily up to 2011, and so did EPS. However 2012 was quite a different picture as sales slowed and EPS fell due to growing competition from mobile computing.

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Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012 Dec. 31, 2012
Revenue ($) in millions 13,890 12,910 13,500 13,460 13,480
Diluted EPS ($) 0.64 0.53 0.54 0.58 0.48

On the quarterly revenues, it seems like Intel is running hard to stay in the same place, and we also don’t like that dip in the EPS in December. We’ll move on from Intel…

NVIDIA (NASDAQ:NVDA): Current Price $12.731

Fiscal Year 2009 2010 2011 2012 2013
Revenue ($) in millions 3,425 3,326 3,543 3,998 4,280
Diluted EPS ($) -0.05 -0.12 0.43 0.94 0.19

Between 2010 and 2013, Nvidia improved sales by over 28%, and EPS marched solidly into the black between 2011 and 2012. Nice numbers, except for that EPS blip in the last year…

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Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Jan. 31, 2012 Apr. 30, 2012 Jul. 31, 2012 Oct. 31, 2012 Jan. 31, 2013
Revenue ($) in millions 953.19 924.88 1,044 1,204 1,107
Diluted EPS ($) 0.18 0.10 0.19 0.33 0.28

The quarterly numbers are also pretty good leading up to October 2012, though business seems to have slowed down in the last quarter. We’ll look for better candidates…

Advanced Micro Devices, Inc. (NYSE:AMD): Current Price $2.71

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 5,808 5,403 6,494 6,568 5,422
Diluted EPS ($) -5.15 0.45 0.64 0.66 -1.60

We are concerned that  things went completely awry for AMD in 2012: revenue fell by over 17% year-over-year  and EPS took a massive hit, leading it into negative territory.

These stocks are hitting our Profit Targets. Click here now to discover winning stocks!

Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012 Dec. 31, 2012
Revenue ($) in millions 1,691 1,585 1,413 1,269 1,155
Diluted EPS ($) -0.23 -0.80 0.05 -0.21 -0.63

No questions that AMD is taking it on the chin in the marketplace. Revenue is spiralling downhill and EPS is keeping pace. AMD is off our list right away…

KLA-Tencor (NASDAQ:KLAC): Current Price $55.76

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 2,522 1,520 1,821 3,175 3,172
Diluted EPS ($) 1.95 -3.07 1.23 4.66 4.44

We like the growth in sales between 2008 and 2012, as also EPS, which has doubled during that same period.

These stocks are hitting our Profit Targets. Click here now to discover winning stocks!

Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012 Dec. 31, 2012
Revenue ($) in millions 642.48 840.52 892.47 720.71 673.01
Diluted EPS ($) 0.66 1.21 1.44 0.80 0.63

But the company turned back the clock after the June 2012 quarter, and both sales and EPS have fallen off sharply. This company is no longer a contender…

Conclusion

Unfortunately, none of the candidates reviewed above make the grade in this ”E-Squared” analysis of chip stocks. Only Applied Materials improved its EPS during the latest quarter, but its overall numbers are  underwhelming to say the least.

“E = Earnings Are Increasing Quarter-Over-Quarter” is a core component of our successful CHEAT SHEET investing framework. Don’t waste another minute – click here to discover our CHEAT SHEET stock picks now!