To: Ann Janssen who wrote (20175 ) 7/15/1998 10:04:00 AM From: Bee-Darn Pang Respond to
INTEL (INTC) 80 11/16 -1 11/16. If a company reports lousy earnings in a forest and no one hears, is there a sound? Intel's numbers are lousy, there is no way around that. Nevertheless, the stock has risen from 70 to over 80 in the past two weeks, and now the stock is down only 1 1/2 in after hours trading. Intel reported second quarter earnings of $0.66 a share. That is 2 cents below the First Call consensus and well below the $0.71 to $0.73 talk of recent days (whisper numbers). Earnings are also down 28% from year ago levels and there isn't any sign of a turnaround through the end of the year. The company says only that second half revenue will be "greater" than the first half, which is hardly encouraging given that second half revenues have averaged gains of 13.4% over the first half in the past eight years. Q3 revenues were put at flat to slightly higher than Q2, compared to average Q3 gains of 4.7%. INTC also says margins will rise a couple of points in the third quarter, but that's an increase off of a lower than expected Q2 figure. The company's revenue and margin forecasts suggest that INTC will earn about $0.71 in the third quarter. Currently, the First Call number is $0.76, so this is essentially a warning that the third quarter will be below expectations and well below the year-ago EPS of $0.88. So, Intel will have flat revenue, margins below previous estimates, and a fourth straight year-over-year decline in profits in the third quarter (the fourth quarter is likely to mark the fifth straight year-over-year decline). This is not what is expected of a high growth company. Simply put, the numbers are below expectation for the current quarter, and indicate worse than expected numbers through the end of the year. The numbers aren't good. The only question is now, do they matter, and if so when? For now, everyone still wants big name "leaders" but this leader is now trading at 25 times trailing earnings with earnings going down. Close your eyes and buy, or will you hear a crash if the fundamentals ever count again?
