Q2 Preview: Intel (INTC) May See Earnings Upside Despite Sleepy PC Environment


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Even with solid earnings out of IBM ( IBM ) and VMware ( VMW ) this week, investors are selling shares of Intel (Nasdaq: INTC) Wednesday afternoon ahead of second-quarter results. The quarterly report will be out after the market close.

Intel shares last traded at $23.00, down 0.2 percent from Tuesday's closing price.

Intel should report earnings of 51 cents per share on revenue of $12.82 billion. Hitting this level of earnings would mark a 13.6 percent drop from last quarter.

Shares gained 10.7 percent in the quarter and are up 3.8 percent since. Shares have traded in a range of $17.60 to $23.96 over the last 52-weeks.

Intel shares trade at 9.6x next year's earnings, compared with 8.6x for Advanced Micro Devices ( AMD ), and about 13x for IBM.

Data from Streetinsider's Ratings Insider has 27 analysts with a Buy, 18 are Neutral, and three suggest to Sell the stock. The analyst price target average is $25.50, with a low of $19 and high of $31.

Analyst Insight

  • Deutsche Bank is looking for earnings of 51 cents and revs of $12.86 billion in the quarter. Deutsche says "strength in Enterprise (Servers & Clients) and potential mix-driven ASP improvement offset offset lower-than expected Consumer PC demand."

    Key items in the quarter will be: 1) Product mix, 2) PC unit growth, 3) share loss/gains vs. AMD, 4) inventory levels, 5) progress in non-core markets.

  • JPMorgan sees a pro-forma EPS of 49 cents in the quarter with revs of $12.8 billion. "Our checks across the semiconductor food chain indicate demand from the PC food chain is expected to remain muted through 3Q11. Both Microchip and Fairchild recently stated PC demand is tracking below seasonal in 3Q11, and our checks indicate Intel pushed out orders to its substrate suppliers...We still expect consensus estimates for Intel to increase following 2Q11 earnings due to strong pricing and easy comps as consensus expects 5% QoQ revenue growth in 3Q11, below normal seasonality of 9% QoQ growth."

  • Wedbush sees earnings of 47 cents per share on revs of $12.101 billion. "While we believe the uncertain macro outlook will likely weigh on the stock in the near-term, as we look beyond these industry wide challenges, we think Intel will trade in-line with our universe as the computing giant (1) integrates new businesses, (2) creates a new category in the traditional notebook/tablet market with 'Ultrabooks', and (3) makes its bid to be a player in the rapidly growing smartphone and tablet markets with its x86 architecture against the incumbent ARM-based CPUs."

    Keys to the quarter from Wedbush: "(1) corporate IT spending for PCs, (2) data center buildout, and (3) ramp of Sandy Bridge, as well as a full quarter of revenue from McAfee and Infineon Wireless Division acquisitions."

  • Wells Fargo is looking for earnings of 49 cents and revs of $12.8 billion. "We believe that Intel benefited from the ramp of new processor families, Sandy Bridge in the desktop and notebook space and Westmere-EX in the 4-way server space, through the whole of the June quarter. On the other hand, AMD's new Llano products for notebooks and desktops were only launched towards the end of the June quarter...Notebook unit shipments reported by the larger Taiwanese notebook ODMs were up 6% month over month in June and up 6% sequentially for the quarter as a whole."

  • Citadel expects earnings of 49 cents per share on revs of $12.77 billion. Revs may come in above the consensus "driven by strength in servers and slightly better than seasonal motherboard and notebook ODM shipments (+8% qoq in aggregate, vs. typical seasonality of +3%). We note that this compares favorably with implied organic growth of roughly flat (on a 13-week adjusted basis) that is implicit in Intel's outlook and the Street consensus. Also bolstering our bullish view on top-line growth are recent results from our proprietary retail PC survey which suggest that Intel's guidance for a slight sequential decline in processor ASPs will likely prove conservative, due in part to a better mix of premium priced Sandy Bridge systems and processors, relative to initial expectations. Finally, our retail PC survey data also suggests that Intel took as much as 1.5ppt of share from AMD in 2Q."
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 Nasdaq, Inc.

This article appears in: Investing Stocks
Referenced Stocks: AMD , IBM , INTC , VMW

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