Q1 Preview: Analysts Bearish on Intel (INTC) Into Results

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Intel (Nasdaq: INTC) shares are trading higher Tuesday ahead of the company's first-quarter earnings report, expected out after the market close. Shares last traded at $19.84, up 1.1 percent from Monday's closing price.

Intel is expected to report EPS of $0.46 on revenue of $11.60 billion. Last quarter, the Santa Clara, CA-based tech giant had EPS of $0.59 on revs of $11.5 billion. The company issued EPS of $0.43 and revs of $10.3 billion for the first quarter of 2010, beating the Street view of $0.38 and $9.8 billion.

Shares fell 2.4 percent during the quarter and are down 2.2 percent since.

Intel currently trades at a forward P/E of 9.1x FY12 EPS estimates, compared to 6.9x for HP ( HPQ ), 14.1x for Oracle (Nasdaq: ORCL), and 9x for Microsoft (Nasdaq: MSFT).

Data from Bloomberg has 33 analysts with a Buy on Intel, 17 with a Hold, and three suggesting to Sell. The analyst price target average is $25, with a high of $31.50 and low of $19. Shares have traded in a range of $24.25 - $17.60 over the last 52-weeks.

In January, Intel cut its first-quarter sales outlook by $300 million, stemming from a chipset design error with its forthcoming Sandy Bridge line of second-generation Core processors. Intel now sees sales of $11.7 billion +/- $400 million.

Analyst Summary

  • Goldman Sachs is bearish on Intel into earnings, expecting results to come in below Street expectations. Goldman is looking for EPS of $0.49 and revs of $11.539 billion.

    Goldman also sees Intel guiding its second quarter below the Street. "Intel's quarter will be impacted by several M&A accounting charges, given that it closed the purchase of Infineon's Wireless Solutions segment on January 31 for approximately $1.4 billion, and McAfee on February 28 for about $7.7 bn. Intel noted that its amortization of intangible assets from the McAfee acquisition will be about $450 mn in 2011, and continue thereafter for several years. In addition, it expects to write-off about $300 mn of McAfee's deferred revenues in 2011, and $100 mn in 2012. Finally, Intel expects additional inventory adjustments and amortization of intangibles related to Infineon WLS. Intel noted in an 8-K last week that it will break out these charges, and we plan to exclude them from our operating EPS estimates."

  • JPMorgan is echoing Goldman, also expecting a miss out of Intel. JPMorgan expects EPS of $0.39. The firm said ODM notebook shipments in March surprised them to the upside. increasing 61 percent on sequential basis.

    "Although we are encouraged by higher than expected notebook ODM shipments in March, we believe it is insufficient to offset sub-seasonal growth in January and February given Intel and the PC food chain expected above seasonal growth in 1Q11...We believe Intel needs to lower utilization rates and inventory (Phase 2 of the downturn), as its inventory reached 94 days in 4Q10, 16 days above the long term average of 78 days, and the second-highest level in fifteen years. We believe Intel is too optimistic in assuming: its new processor will drive higher PC demand, PC units will grow 13%-15% in 2011 without tablets, and netbooks will grow in 2011."

  • Kaufman Bros. expects EPS of $0.44 on revenue of $11.494 billion. Kaufman expects a tough quarter from Intel given the acquisitions of McAfee and Infineon's Wireless business, as well as a tough PC market.

    "On the server side, our checks indicate that this segment performed a bit better than normal seasonally. Netting this out, we arrive at our revenue number of $11.49B vs. Street at $11.61B, which represents essentially flat revenue growth Q/Q. In terms of 1Q11 gross margins and EPS, we are modeling gross margins in line with guidance at 61% (a decline of about 700bps Q/Q) given weaker margins from PC pricing offset by better mix of higher margin Server products. Netting this out we arrive at our 1Q11 EPS estimate of $0.44 vs. the Street at $0.46."

  • Miller Tabak + Co. is looking for EPS of $0.49. "Recent data from notebook ODM's in Taiwan point to a much weaker than expected March quarter...data from Taiwan for February was particularly weak and makes us worried about the heath of the quarter for Intel. February has a distortion from Intel's chipset problems but the weakness appears to extend beyond that issue, in our view."

  • Wells Fargo sees EPS of $0.43. Wells believes "Intel was able to resolve the Sandy Bridge chipset issue about two weeks ahead of its initial estimates, with first fixed chipsets having begun shipping in mid-February. Taiwanese PC-related data showed a sharp rebound in the month of March (e.g. Taiwanese notebook ODM units up 61% month/month), due in part we think to ramping sales of Sandy Bridge based desktops and notebooks....Topics of interest that might be discussed on Intel's earnings call include the success of Sandy Bridge and the resolution of Intel's chipset issue, the ramping of Westmere-EX server processors and what is occurring with Itanium and what Intel is doing in the tablet/Atom space with Oak Trail, Medfield and Cloverview."
Stay tuned to StreetInsider.com's EPS Insider section to see our analysis of the highly-anticipated quarterly results within seconds of the release.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Stocks

Referenced Stocks: HPQ , INTC , MSFT , ORCL

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