Can Intel Earnings Shake Dell’s Shadow? (INTC, DELL, AMD, TXN, MSFT)

Intel Corporation (NASDAQ: INTC) is set to report earnings today after the close of trading.  The processor and chip giant has Thomson Reuters estimates of $0.08 EPS on $7.27 billion in revenues.  Because of firming conditions and indications from leaders, there was a higher whisper number going around.  But now that Dell Inc. (NASDAQ: DELL) has canned the near-term on lower margins due to netbooks and due to current IT-delayed spending, the mood has been tempered a bit.  Either way, we would not expect that any negative surprises would be received favorably by traders.

Intel has backed away from giving super-specific guidance during these harder times.  But the consensus 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.

We expect direct inferences this quarter to be made regarding how Advanced Micro Devices Inc. (NYSE: AMD) is doing in its processor sales.  The race is on for netbooks and lower-end PCs, yet we keep seeing more Intel processors.  Its new pacts with Nokia and the buyout of Wind River also puts the company more head to head with Texas Instruments (NYSE: TXN), and we would hope to at least start hearing some more specific goals on that front.  We also have to draw the parallel to Microsoft Corp. (NASDAQ: MSFT) based on the notion that if Intel sees strong shipments of processors then someone has to get the operating system business.  Microsoft has Windows 7 coming out in October, and they didn’t exactly call it the WinTel alliance just for fun.

Intel’s shares are flat today and are avoiding the woes of Dell.  As far as how it has been doing, shares are up about 33% from the March lows.  Intel’s 200-day moving average is significantly lower at $14.72 today, but the stock has been tracking the 50-day moving average.  That 50-day moving average today is listed as $15.97, so in theory there is strong support about 3% under the current $16.50 price.

As far as stock options, these have a very short time value as expiration is Friday.  But based on the July puts and calls, we have an expected maximum move of 3% to 4% based on the current prices.

Analysts are still very mixed on this leader.  We have an average price target of $17 to $18 on the stock.

Again, Intel’s dominant expectations were a bit hamstrung by the news out of Dell ahead of its analyst meeting today.  It is impossible to know exactly what the company will say, but based on all the available information we are not expecting this quarter to be the most violent or volatile post-earnings reactions.

This week’s full technology earnings preview including IBM and Google is available here.

JON C. OGG
JULY 14, 2009