North America

Earnings Preview: Intel Q2 2015 (INTC)

By: Craig Bowles

Overview:

Intel, Corp. (INTC) is slated to report 2Q 2015 earnings after the bell on Wednesday, July 15th. The earnings release is expected at approximately 4:00 p.m. EST with a webcast conference call to follow at 5:00 p.m. accessible through Intel Investor Relations. A member of the Dow Jones Industrial Average, S&P 500, and NASDAQ 100, Intel has significant market influence and the potential to impact the broader market gauges. Other tech names are often impacted by the results, along with related ETFs such as the PowerShares (QQQ) & Market Vectors Semiconductor ETF (SMH).

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Outliers & Strategy

Key measures:

  • Earnings Per Share (EPS): The current Street estimate is $0.51 (range $0.42 to $0.59). (Source: Yahoo! Finance) Consensus was $0.48 three months ago. Intel typically provides a “clean” number that is comparable to consensus but will otherwise publish a non-GAAP if need be.
  • Revenues: Company guidance range is $12.7 bln to 13.7 bln. Analysts expect a decrease of 5.2% y/y to $13.12 bln (range $12.50 bln to $14.00 bln).
  • Gross Margin: Company guidance is 60% to 64%, so 62% is the midpoint.
  • Revenue Guidance (3Q 2015): Analyst estimates are for $14.24 bln (range $13.00 bln to $15.13 bln).
  • Gross Margin Guidance (3Q 2015): Last year saw strong guidance of 64% to 68%, up 3% from the prior quarter.
  • Gross Margin Guidance (FY 2015): Current company guidance is 59% to 63%, so 61% is the midpoint.
  • Intel shares are yielding 3.2%, so are getting closer to the 5-year average of 3.3%. Price/Earnings 12.5 compares to a 5-year average of 13.1; Price/Book 2.5 compares to a 5-year average of 2.5; Price/Revenue 2.6 compares to a 5-year average of 2.6; Price/Cash Flow 6.9 compares to a 5-year average of 6.7.
  • Analysts view Intel with 23 Buy, 12 Hold, and 4 Sell ratings. (source: Analystratings.net)
  • Insiders have sold 351,414 shares over the last three months and 3,131,118 shares in the past year. Insiders haven’t purchased any shares in the past twelve months. (source: NASDAQ.com) Last July, Intel added $20 billion to the stock buyback plan and spent over half in 2014.
  • Intel is the first of the major semiconductor companies to report quarterly results and could impact Advanced Micro Devices (AMD), Texas Instruments (TXN), STMicroelectronics (STM), Qualcomm (QCOM), and Applied Materials (AMAT).
  • Intel has 1-day average price change on earnings of 3.75%. Options are pricing in an implied move of 5.68% off earnings.

Recent News

  • 07/08: Bernstein Research believes things at Intel may be deteriorating under the surface. Summit Research doesn’t think Intel will warn now — they would have done so already by this time, according to a post by Barron’s.com.
  • 06/15: Deutsche Bank maintained a Buy rating but trimmed quarterly estimates. While Intel appears to be running within its own guidance range, he said recent checks indicate that the timing of the Win10/Skylake launch may push gains from those launches into the second half of the fiscal year, according to a post on MarketWatch.com.
  • 06/12: Intel’s pending round of job cuts start Monday, part of a broad effort to reduce spending in the second half of 2015 in response to a disappointing start to the year, according to a post by The Oregonian.
  • 06/12: Intel introduced Compute Stick, a 2 ounce Windows 8.1 computer, according to MercuryNews.com.

Technical Review

Intel shares rallied in the second half of 2014 to catch back up with the general bull market of the previous two years, but have struggled since with the easy money having been made. Seasonally, the stock tends to do well in the spring and early summer but faltered in June.  March found support just below $30. The next support area is around $26. Resistance at around $34 has led to head-and-shoulders top worries. (Chart courtesy of StockCharts.com)

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Summary

Intel’s stock price pullback since May has improved valuations to readings similar to the 5-year averages. The company had beaten earnings estimates by 1c to 8c the three previous quarters before last quarter’s in line. Mixed market reactions show the importance of underlying measures and guidance. Estimize consensus is for an EPS of $0.52 on revenue of $13.354 bln.

 

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