Intel Earnings Preview: Sales Growth Returns

Intel [[INTC]] is scheduled to report their fourth quarter 2009 results after the market closes on Thursday, January 14, 2010. Based on our analysis, we at 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 $10.24 billion and EPS of $.31. This would represent a 24% increase in revenues from last year’s $8.23 billion in the same period. The current analyst consensus estimates calls for revenues of $10.16 billion and EPS of $.30. On October 13, the company provided fourth quarter revenue guidance of $9.7 – $10.5 billion.


After four consecutive quarters of y/y revenue declines, Intel is expected to return to positive sales growth this quarter. Unfortunately, Intel’s profitability will be impacted this quarter by their $1.25 billion legal payment to Advanced Micro Devices [[AMD]] to settle their outstanding antitrust and patent dispute. However, the key story that investors should take notice of will be their impressive top-line growth.  


As the global economy continues to improve, Intel is benefitting from increasing demand for microprocessors and chipsets. Gartner is forecasting a 3.3% growth in enterprise IT spending in 2010 after a decline of nearly 7% in 2009. Intel’s shares have rallied on the improving economic outlook and are trading near their 52-week high.


Stock Performance

In 2009, Intel’s shares posted an impressive 39% gain and outperformed the 19% gain in the Dow Jones industrial average. Since the end of February 2009, INTC’s stock price has surged 164%.



Shares are now trading at 14x consensus 2010 EPS estimates. This is a slight discount to the relative valuations of their peer group. Despite the strong performance of Intel’s stock in 2009, there valuation still looks attractive and we would expect their stock price to climb higher in 2010.


Recommendation: Buy with a $24 price target


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