Which Semiconductor Stocks Have the Strongest Earnings Trends?

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’).

Stocks with improving earnings metrics are worthy of your extra attention. Click here to discover our CHEAT SHEET stock picks now!

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

Intel (NASDAQ:INTC): Current Price $21.25

Fiscal Year 2007 2008 2009 2010 2011
Revenue ($) in millions 38,330 37,590 35,130 43,620 54,000
Diluted EPS ($) 1.18 0.92 0.77 2.01 2.39

We’re impressed with Intel’s performance post-2009, as both revenue and earnings per share have moved up substantially.

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

Quarter Sep. 30, 2011 Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012
Revenue ($) in millions 14,230 13,890 12,910 13,500 13,460
Diluted EPS ($) 0.65 0.64 0.53 0.54 0.58

Encouragingly, Intel has also reported three quarters of rising EPS. Here’s a company to be kept on the watch list.

Advanced Micro Devices, Inc. (NYSE:AMD): Current Price $2.46

Fiscal Year 2007 2008 2009 2010 2011
Revenue ($) in millions 5,858 5,808 5,403 6,494 6,568
Diluted EPS ($) -6.08 -5.15 0.45 0.64 0.66

We are impressed that after 2008 AMD has grown both revenue and income steadily.

Let’s take a closer look at the quarterly data:

Quarter Sep. 30, 2011 Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012
Revenue ($) in millions 1,690 1,691 1,585 1,413 1,269
Diluted EPS ($) 0.13 -0.23 -0.80 0.05 -0.21

Unfortunately, the quarterly numbers are a totally different story. After March 2012, both revenue and EPS have taken a dive. We need to look elsewhere.

NVIDIA (NASDAQ:NVDA): Current Price $12.17

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 4,098 3,425 3,326 3,543 3,998
Diluted EPS ($) 1.31 -0.05 -0.12 0.43 0.94

Nvidia seems to have gotten its act together in 2010 and later, with revenue and earnings bumping up impressively.

Quarter Oct. 31, 2011 Jan. 31, 2012 Apr. 30, 2012 Jul. 31, 2012 Oct. 31, 2012
Revenue ($) in millions 1,066 953.19 924.88 1,044 1,204
Diluted EPS ($) 0.29 0.18 0.10 0.19 0.33

We see that EPS has grown smartly over the last two quarters, in tandem with a recent growth in the topline. Definitely the chip stock to watch.

Texas Instruments Inc. (NYSE:TXN): Current Price $33.52

Fiscal Year 2007 2008 2009 2010 2011
Revenue ($) in millions 13,840 12,500 10,430 13,970 13,740
Diluted EPS ($) 1.83 1.44 1.15 2.62 1.88

This company is not one for consistency with earnings. Moreover, sales have been lackluster over the last two years.

Quarter Sep. 30, 2011 Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012
Revenue ($) in millions 3,466 3,419 3,121 3,335 3,390
Diluted EPS ($) 0.51 0.26 0.22 0.38 0.67

But something is cooking with the quarterly numbers. We see that earnings have grown quarter-over-quarter since March 2012. A stock to look at alongside other qualifying peers.

ARM Holdings plc (NASDAQ:ARMH): Current Price $41.43

Fiscal Year 2007 2008 2009 2010 2011
Revenue ($) in millions 518.57 554.52 477.63 628.71 789.08
Diluted EPS ($) 0.16 0.16 0.15 0.30 0.38

ARM is doing things right after 2009 with both revenue and EPS growing at a very decent clip.

Quarter Sep. 30, 2011 Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012
Revenue ($) in millions 192.31 216.15 213.86 210.42 231.09
Diluted EPS ($) 0.11 0.11 0.13 0.13 0.14

But things seem to have quietened down in the quarterly numbers as we see that earnings have remained essentially flat, as has revenue.

Conclusion

It’s a toss-up between Intel and Nvidia, but we’ll go with Nvidia because its quarterly earnings growth is far more impressive. Nvidia passes our “E-Squared” investment analysis.

“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!