What to Expect From Intel Earnings (INTC, SMH, XSD)

Intel Corporation (NASDAQ: INTC) is due to report earnings after the close of trading Tuesday and shares are currently up in anticipation.  Thomson Reuters has estimates at $0.46 EPS and $11.6 billion in revenue.  The fear is not so much what happened in the first quarter, but there is a fear of a talking down numbers or an outright warning for the current quarter we are in now.  Thomson Reuters estimates for next quarter are $0.45 EPS and $11.87 billion in revenue.

This earnings report is going to likely have an impact on the Semiconductor HOLDRs (NYSE: SMH) and the SPDR S&P Semiconductor (NYSE: XSD) as Intel is such a large weighting in these ETFs.

Our concerns for Intel are the same as elsewhere… a slowing PC-sales market and the growth of tablets that so far are skipping Intel processors.  The good news here is that Intel is already trading as though it has to warn as it priced at about 9.5-times 2011 estimates.  Still, the call for an earnings warning has been out for over a week now.

Options traders appear to be bracing for a move of only about $0.50 to $0.60 going into earnings.  With this report being more controversial, we could easily see options traders having this one wrong today.  Analysts still have a price target objective of nearly $25.00 per share.

We would further note that the chart has a lot of overhang here per the StockCharts.com chart.  The 200-day moving average is at $20.24 and Intel’s shares were not able to hold up above the 200-day moving average in mid-March.  Shares are around $19.75 and the 52-week range is $17.60 to $24.25.

JON C. OGG