Intel Earnings Not as Bad as Guidance, but Some Caution Remains

Intel Corp. (NASDAQ: INTC) has managed to beat earnings, but the earnings guidance and some core metrics will be a disappointment. As a reminder, Intel had already guided the expectations ahead of today’s report. Its quarterly earnings came in at $0.58 EPS and revenue was $13.5 billion. Thomson Reuters had estimates of $0.53 EPS and $13.62 billion in revenue.

Operating income was $3.8 billion and net income of $3.0 billion in the quarter. The company generated approximately $5.1 billion in cash from operations. It used some $1.1 billion to pay dividends and it spent $1.2 billion to repurchase common stock. Gross margin was 63.3%, up 1.3 percentage points above the midpoint of the company’s updated expectation of 62 percent. Intel’s tax rate was 24% versus its prior expectation of 28%.

Guidance is a slight disappointment as revenue was put at $13.6 billion, plus or minus $500 million, versus a Thomson Reuters consensus of $13.78 billion. That is the key fourth quarter as well. Gross margin was put at 57% to 58% plus or minus a couple of percentage points in non-GAAP terms. The company’s effective tax rate is expected to be approximately 27%.

The company described the quarter as a “continuing tough economic environment” and talked about the world of computing in the midst of a period of breakthrough innovation and creativity. CEO Paul Otellini also said, “We’re pleased with the continued progress in Ultrabooks and phones and excited about the range of Intel-based tablets coming to market.”

Other comments were as follows:

• PC Client Group revenue was $8.6 billion, flat sequentially and down 8% from a year ago.
• Data Center Group revenue was $2.7 billion, down 5% sequentially and up 6% from a year ago.
• Other Intel architecture group revenue was $1.2 billion, up 6% sequentially and down 14% from a year ago.

Intel shares closed up 2.85% at $22.35 and shares have given back most of the gains as they are down almost 2% at $21.95. Intel’s 52-week range is $21.40 to $29.27 and analysts had a consensus price target of $29.71 ahead of today’s earnings report.

JON C. OGG