Intel Earnings Preview: Third Quarter 2009

Intel [[INTC]] is scheduled to report their third quarter 2009 results after the market closes on Tuesday, October 13. Based on our analysis, we at EarningsPreviews.com are expecting INTC to report better than expected quarterly results that will exceed Wall Street’s consensus expectations.

 

Analyst Expectations

We are forecasting revenues of $9.06 billion and EPS of $.29. This would represent an 11% decline in revenues from last year’s $10.22 billion in the same period. The current analyst consensus estimates calls for revenues of $9.02 billion and EPS of $.27. On August 28, the company increased their third quarter revenue guidance range to $8.8 – $9.2 billion up from their initial range of $8.1 – $8.9 billion.

 

Business is picking up nicely for Intel and this will likely be the last quarter they will have to report y/y sales declines. Beginning next quarter, Intel’s revenue comps become much more favorable and the company will be able to demonstrate both revenue growth and solid profits. We view positively the company’s surprise announcement that stronger than expected demand for microprocessors and chipsets would help Intel deliver stronger sales results in the third quarter. However, INTC’s stock price has only increased 1% since the announcement which may indicate that the stock will receive a nice jump following their earnings announcement.

 

With the global economy improving, we believe that Intel will be one of the leading performers in the Dow Jones index over the next few months. Corporate IT spending is already recovering in the second half of 2009 and we would expect even stronger recovery as tech budgets are increased for 2010. The initial positive reviews for Windows 7 should also be considered an incremental positive for Intel in 2010.

 

Share Performance

Since the beginning of the year, Intel’s shares have gained 38%. In 2008, INTC’s shares fell nearly 44% and underperformed the 34% decline in the Dow Jones industrial average.

 

Valuation

Shares are now trading at 16x consensus 2010 EPS estimates. This is above the relative valuations of their peer group. Given Intel’s improving prospects and favorable comps in the coming quarters, we feel that investors should continue to buy this stock

 

Recommendation: Buy with a $22 price target.

 

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