Is Intel A Bellwether For The Semiconductor Industry?

Intel Corporation INTC is set to release its Q2 earnings report on Wednesday, and owners of semiconductor stocks will be watching closely for an indication of what they can expect from the sector in coming months.

Benzinga compared the market’s reaction to Intel earnings over the past two years to the trading of semiconductor stocks in the quarter that followed to determine if Intel’s earnings are a predictor of things to come for chip makers. Here’s what was found.

Intel Numbers

First, a quick look at the market reactions to Intel’s last eight earnings reports shows that the reports have been a mixed bag for the chip maker. Earnings have certainly served as a catalyst for Intel, but the direction of the stock’s reaction has been unpredictable.

Intel’s stock has climbed five out of eight times on the day following its last eight earnings releases. The stock has jumped an average of 3.15 percent in magnitude on those days, but has produced an overall average return of only 0.89 percent.

Related Link: IBM Overtakes Intel Through This Ultra-Dense, Ultra-Powerful Chip

Intel As A Bellwether

Semiconductor investors are much more interested in the predictive behavior of Intel’s earnings report. Benzinga compared Intel’s next-day market reaction to earnings with the performance of the Market Vectors Semiconductor ETF SMH during the three months that followed to look for a pattern.

In the quarters following the market’s three most positive reactions to Intel earnings, the SMH gained an average of 7.44 percent. This result seems to indicate that a big Intel beat is good news for the industry. However, an Intel miss may not be as bad as expected. During the quarters following the market’s three negative reactions to Intel earnings, the SMH climbed an average of 4.49 percent.

Conclusion

In recent years, the semiconductor segment has been hot, and the SMH is up 38.3 percent since July of 2013.

Certainly, Intel’s earnings are one indicator of the health of the chip market, but the numbers suggest that Intel is far from a “can’t-miss” predictor of what’s to come from other semiconductors.

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