Briefing.com has provided a summary take on INTC's quarterly report of yesterday as follows:
Intel (INTC) 25.23 +1.13: Intel reported its Q2 (Jun) results last night and it is fair to say that the chip giant did about all it could to suggest that its business, at worst, is stable, and, at best, is beginning to improve. It did so by surpassing expectations for Q2 and raising gross margin guidance for Q3 and the fiscal year.
Specifically, Intel posted a profit of $0.14 per share that was a penny ahead of the Reuters Research consensus estimate, flat sequentially, and up 100% from the yr-ago period. Revenue of $6.8 bln topped the consensus estimate of $6.72 bln, rose 1.0% on a sequential basis, and jumped 8.0% from last year, which was the largest yr/yr increase since 3Q00.
Looking ahead, Intel guided Q3 (Sep) revenues to a range of $6.9-7.5 bln and indicated that gross margins are expected to be 54%, plus or minus a couple of points. The midpoint of its revenue guidance is roughly in-line with the current consensus estimate of $7.17 bln and in-line with normal seasonal patterns as it represents sequential growth of 6.0%. Additionally, Intel bumped up its FY03 gross margin expectations to 54%, plus or minus a couple of points, from 51%, plus or minus a couple of points, due to higher expected revenue and lower start-up costs.
The gross margin guidance, in particular, has been a rallying point as it suggests improved levels of profitability. To be sure, several analysts have raised their EPS estimates in the wake of Intel's guidance, yet most have been quick to point out that the strong gross margin guidance is mostly an Intel-specific story. The Fahnestock analyst astutely observed that the bottom-line boost isn't likely to be as significant as one would think considering that the gross margin boost will be helped, in part, by shifting certain costs from Cost of Goods Sold to R&D. In short, operating margins won't benefit from the reallocation of expenses.
Nonetheless, Intel will benefit from an improved product mix and market share gains. It certainly stands to benefit, too, from a rebounding economy and a PC upgrade cycle. Interestingly enough, Intel confessed that it is still not seeing signs of economic recovery, a big upgrade cycle, or information technology budgets increasing. Be that as it may, it believes there will be a shift back to more normal seasonality in its own business where the second half of the year grows more than the first half of the year shrinks.
Valuation concerns, admittedly, should serve as a restraining factor for Intel's stock given management's cautious commentary on the economy and considering that its current stock price discounts a meaningful recovery that has yet to happen. Intel's management, however, sounded more optimistic than it has in recent quarters about the company's prospects. That consideration, and the recognition that earnings estimates are increasing and that business conditions for the leading semiconductor company are improving, should leave the market inclined to view pullbacks in its stock as a buying opportunity. From a broader perspective, Intel's report was good enough to keep the market hopeful that better days lie ahead for the economy, corporate profits, and the stock market.-- Patrick J. O'Hare, Briefing.com |
