This week has marked the official launch of second-quarter earnings season, and Intel Corp. (NASDAQ: INTC) is set to dominate the bias toward much of the technology sector when it reports earnings on Tuesday after the close. It is very likely that Intel will lead anything tied to processors, semiconductors, PCs and servers — including Microsoft Corp. (NASDAQ: MSFT) — and the focus almost feels temporarily like the old WinTel alliance of yesteryear.
Please note that this post was updated for the so-called Whisper estimates (see below).
UPDATE 4:50 Eastern Time: Also, here is the post-earnings report from Intel, including stocks buyback data, guidance, and unit by unit performance metrics.
Keep in mind that Intel already raised its guidance back in June. This created a huge stock surge, and many analysts have upgraded their ratings and their price targets. It turns out that the move by Microsoft to jettison support of the decade-old Windows XP brought enough of a corporate PC market resurgence. Intel’s lack of making any inroads in mobile has been ignored of late. This may ultimately change, but investors remain hopeful that the PC-refresh cycle is still being driven in a post-XP business world for the next several quarters.
Another issue to consider is that Intel’s pre-earnings stock price of $31.20 on Tuesday is about $1.25 above the consensus analyst price target. Coming into this week, Intel’s stock price was up almost 12% in the past month alone. It was also up more than 22% so far in 2014 ahead of the report.
The current Thomson Reuters estimates are $0.52 earnings per share (EPS) and $13.69 billion in revenue. Next quarter’s consensus estimates are $0.56 EPS and $14.02 billion in revenue. The question is whether or Intel’s revenue growth is high enough in analyst expectations. Thomson Reuters is calling for only 3.5% sales growth in 2014 to $54.55 billion, followed by 2.4% sales growth to $55.88 billion in 2015. Much of that growth hinges on the Internet of Things and the processor design wins tied to that emerging sector.
Our take after the raised guidance is that Intel will have to again raise the bar in order to keep wary investors and analysts from wanting to take profits at a decade high. Also, we believe that Microsoft shares will closely track Intel’s shares after the report due to the post-XP ties.
UPDATED: WhisperNumber.com has sent us updated information on Intel’s expected earnings. The whisper number is $0.55, three cents ahead of the analysts’ estimate and showing confidence from investors. Whispers range from a low of $0.52 to a high of $0.60. Intel has a 59% positive surprise history (having topped the whisper in 35 of the 59 earnings reports for which we have data). The overall average post earnings price move is ‘opposite’ (beat the whisper number and see weakness, miss and see strength) when the company reports earnings.
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