INTEL REPORTS BEST QUARTER EVER
Expect the earnings rally to continue tomorrow. Intel reported a blow-out quarter after hours. The company, which always sandbags, reported better than expected EPS of 51 cents (43 cent estimates) on revenues of $10.8B ($10.25B estimates). More importantly, however, they are raising guidance and expect capex to increase substantially in the coming quarters. The market will certainly love this news, however, it is important to note that Intel has a tendency to sandbag estimates and generally beats. The previous blowout quarter coincided with a near market top. Via Business Wire:
“Strong demand from corporate customers for our most advanced microprocessors helped Intel achieve the best quarter in the company’s 42-year history,” said Paul Otellini, Intel president and CEO. “Our process technology lead plus compelling architectural designs increasingly differentiate Intel-based products in the marketplace. The PC and server segments are healthy and the demand for leading-edge technology will continue to increase for the foreseeable future.”
- Spending (R&D plus MG&A): $12.7 billion, plus or minus $100 million. The company’s prior expectation was $12.4 billion, plus or minus $100 million.
- R&D spending: Approximately $6.6 billion. The company’s prior expectation was approximately $6.4 billion.
- Capital spending: $5.2 billion, plus or minus $200 million. The company’s prior expectation was $4.8 billion, plus or minus $100 million.
Cullen Roche
Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.
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9 Comments
Say what you will about estimates and expectations, I agree, but Intel did increase (blowout) sales by 34%, that’s impressive.
I agree. I don’t care how bearish you are. You can’t look at these numbers and complain. Sustainability is another thing….67% margins is nearing a ceiling if you ask me…
CSX and AA (yesterday’s earnings news) both reported well, and then closed either lower or well off the day’s high. This feels a lot like previous three earning seasons where stocks topped out at or just after earnings release. By mid earning season the market indices were rolling over.
We’ll see if this continues.
The stark difference is that the market was still running up on momentum/inventory re-stocking from the March 2009 lows in those previous quarters. It’s been a much different story heading into this earnings season — with stocks slumping through May and June.
Pent up replacement cycle due to Win7. Agree abt margins. Question is how long will the replacement cycle last?
This feels a bit like July 2009 in some ways. Many seem to be focused primarily on technicals and a bearish outlook on the economy (double dip on everyones lips). Last year the focus just before Merideth Whitney gave her GS upgrade and Intel reported was the “head and shoulders” formation which apparently turned out to be a inverse H&S. Every bear was talking of retesting the lows and every bull was qualified bullish. Positive economic signs were green shoots that would quicky disappear.
This year constant talk of a potential market collapse and potential new lows. Another head and shoulders formation and death cross. Every bull is either near-term bullish and longer-term bearish, near-term bearish and longer-term bullish or bullish on earnings but bearish on the economy. No pure bulls anywhere to be found. Pretcher, Rosenberg, Tice get lots of air time. Barton Biggs says a month ago that the correction is a buying opportunity and then sell all his US equity position just before the current rally started.
I am not at all bullish myself, but with everyone pretty bearish it seems like a rally was inevitable. The extent of the rally may well depend on just how much short covering takes place.
nearly 100 handles off of last monday’s oversold low. market is short term way overbought. i don’t expect much fireworks at all tomorrow. as a matter of fact i wouldn’t be surprised to see a red close. with most of the globe in economic slowdown intc guidance seems preposterous.
I know, it is all these ipods, ipds and other gadgets. People are not buying houses anymore, so to console themselves they are buying all kinds of gadgets. You can buy an ipad with a couple of unemployement checks.
It appears the main driver for Intel earnings were related to corporate purchases. This is likely a result of two things:
1. Lower pricing made infrastructure upgrades a viable option
2. The market semi-recovery points to a improved economic environment which means that corporations looking 5+ years in advance are expanding before the flood.
The first reason is likely a good one, especially for a company sitting on cash (though technology investment is not warranted unless necessary as it loses values at a high rate). The second reason may or may not be a good idea; anticipating an expansion before it has occurred and given significant headwinds could be a fatal risk to take. We all remember how the retailers were crushed in 2008 sitting on way too much inventory into the holiday season.
Intel’s earnings are good. I’m not too worried about the profit margins as it appears that just about all the income increase came from increased revenues – which is a good thing.