Intel Beats but Trims Forecast

Zacks

Intel Corp. (INTC) announced better than expected earnings and revenue after the closing bell today.  The company posted a third quarter EPS of $0.58, and revenues of $13.48 billion, beating the Zacks consensus estimates of $0.53, and $13.46 billion respectfully.  This reverses the recent trend of negative earnings surprises by this company over the past two quarters.

The main drivers behind the earnings beat was cost control, and stable margins.  It was announced that CAPEX was once again trimmed from $11 billion to $10.8 billion for 2013.  Moreover, gross margins are expected to be 61% give or take a few basis points. 

On a negative note, management decreased revenue guidance for the fourth quarter, from $14 billion to $13.7 billion.  It appears as though they are not anticipating a significant revenue stream from their next generation Tablet Chip, given that the launch is to take place during the fourth quarter. Furthermore, we are awaiting information regarding their smartphone story which will have a strong impact on earnings starting in early 2014.

Specifically, we are looking forward to the data on PC Builds (are they flat, or up 4% like INTC guided), and to what extent the back to school PC demand impacted the top line.  The biggest issue we are anxious to see is what the impact of ARM processors will have on Intel, which could expose a significant loss of market share for the company. 

In afterhours trading INTC is down slightly (just over 1%) on moderate volume.  Zacks will have a fully detailed report exploring all the data posted early tomorrow morning.

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