Intel Earnings Preview: Second Quarter 2009

Intel [[INTC]] is scheduled to report their second quarter 2009 results after the market closes on Tuesday, July 14. Based on our analysis, we at are expecting INTC to report better than expected results that exceed Wall Street’s consensus expectations.


Analyst Expectations

We are forecasting revenues of $7.27 billion and EPS of $.09. This would represent a 23% decline in revenues from last year’s $9.47 billion in the same period. The current analyst consensus estimates calls for revenues of $7.23 billion and EPS of $.07.


In their last earnings release, Intel CEO Paul Otellini announced, “We believe PC sales bottomed out during the first quarter and that the industry is returning to normal seasonal patterns.” We concur and believe that Intel’s 26% revenue decline last quarter was a bottom and expect the top-line to begin climbing higher this quarter.


While the company will likely outperform expectations for the quarter, the real story is the expected resurgence in demand in the second half of the year. Corporate IT spending has languished in the first half of the year, but with increasing stabilization in the financial markets enterprise spending is expected to rebound in the coming months. Looking ahead to 2010, Intel should benefit from Windows 7 release as well as a return to more “normal” levels of enterprise spending.


Share Performance

Since the beginning of the year, Intel’s shares are up almost 9%. In 2008, GS’s shares fell 45% and underperformed the 34% decline in the Dow Jones industrial average.



Shares are now trading at 18x consensus 2010 EPS estimates. This is above the relative valuations of their peer group. The market is already pricing in Intel’s growth prospects, so we would recommend investors wait for a pullback.


Recommendation: Hold with a $17 price target.


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