Full 360 Review of Technology Earnings Previews (NVLS, INTC, XLNX, GOOG, IBM)

This week will mark the kickoff for the real flood of Q2-2009 earnings season.  We have many key technology stocks reporting earnings this week and these should help to craft the post-earnings bias for traders for the following two weeks.  Novellus Systems Inc. (NASDAQ: NVLS) is on deck this afternoon.  The big one for Tuesday is processor-giant Intel Corporation (NASDAQ: INTC).  Xilinx, Inc. (NASDAQ: XLNX) is on deck for Wednesday after the close.  Thursday is web search giant Google Inc. (NASDAQ: GOOG) and IT-giant International Business Machines (NYSE: IBM).  We have more details on the Thomson Reuters estimates for each, but we have also given some performance and relative analysis for each as well.

Novellus Systems, Inc. (NASDAQ: NVLS) is expected to post -$0.38 EPS and $119.22 million in revenues.  To show how much business is off in the chip cap-ex side of the equation, its Q2-2008 revenues were more than $257 million.  For the next quarter, estimates are -$0.24 EPS and $139.2 million in revenues.  Novellus shares are up roughly 50% from the March lows.  This one designs and makes equipment used in the fabrication of integrated circuits and semiconductors, so similar fallout from the move might be seen in AMAT, KLAC, TER and LRCX.

Intel Corporation (NASDAQ: INTC) will set the real direction for chips, processors, and for PC stocks based on its dominance.  The recent deal making is small on the scale that Intel operates on, and estimates are $0.08 EPS on $7.27 billion in revenues.  Because of the fears of a loss at the worst of last quarter and because of being overly cautious, we have unofficial estimates higher as of Monday.  Estimates for the Q3 period ahead are $0.16 EPS and $7.79 billion in revenues.  To keep a perspective on how wide the forward multiples are, the EPS target for 2009 is $0.56 EPS and the estimate for 2010 is $0.90 EPS.  Because Intel is so dominant in the sector, we think Intel offers direct insight into sales at AMD in processors and TXN in mobile processing, Dell and H-P in PCs, and therefore MSFT for operating systems.  Besides these, the reality is that it may be safe to assume that as goes the bias to the coming quarters at Intel would be much of the same elsewhere throughout technology.  Intel’s shares are up about 33% from the March lows.

Xilinx Inc. (NASDAQ: XLNX) is on deck for chips and circuits after the close of trading on Wednesday.  Estimates are $0.19 EPS and $381.4 million in revenues.  For next quarter, those estimates go to $0.20 EPS and $381.9 million in revenues.  As you already got the tertiary fallout on Intel, we will leave it there.  The most tied stock to Xilinx is traditionally ALTR.  Shares of Xilinx are up ‘only’ about 20% from the lows in March.

Google Inc. (NASDAQ: GOOG) will set the trends for online media and online advertising.  Estimates are $5.06 EPS and $4.05 billion in revenues, but remember that those are ex-TAC revenue projections.  It never gives guidance, but estimates for the next report are $5.21 EPS and $4.19 billion in revenues. While it is still targeting MSFT, YHOO and BIDU should trade hand- in-hand and then perhaps IACI and DRIV.  What is interesting is that the rise of Bing has not really bitten hard at all into search.  We showed a report last week giving Google about 74% of U.S. search share.  A trend that is not readily discussed in the media yet is a firming up in the drops that were routine in online ad revenues.  CPM’s have stabilized and have even been improving in our own checks around in the sector of online media and advertising.  That is good for the online media players and good for Google.  That is why you have seen a slight rise of analyst estimates and why there is a slightly higher whisper number.  Google stock is up more than $100 or one-third from the March lows.

International Business Machines (NYSE: IBM) will mark the last of the technology, internet and IT giants this week.  IBM was given a bit of a stump after Goldman Sachs recently took down the rating due to difficulty for upside above the $120 target.  Estimates are $2.02 EPS and $23.58 billion in revenues for this last quarter, and next quarter estimates are $2.15 EPS and $23.47 billion in revenues.  There has not been much upside to its targets, and the chart shows what seems like a scenario for equal room to the upside as to the downside.  IBM shares are up between 20% and 25% from the March lows.

As a reminder, these dates can change.  But as more companies report earnings, each of these estimates will change from last minute changes by analysts. As the week progresses, we’ll make updates for changes that reflect the prior earnings changes and more detailed analysis on the charts, options trading, and fundamentals.

Jon C. Ogg
July 13, 2009