Will Intel Miss Sales Targets Tonight?

Tonight, semiconductor giant Intel (Nasdaq: INTC) reports fourth-quarter and full-year earnings. My inside sources say that the company takes a lot of pride in being one of the first companies out of the gate in every earnings season, come hell or high water. Let the banks have their fun; this is where we start talking about real business. So here's the starting bell, folks -- at least the way I see it.

Ding, ding, ding!
Coming into this report, it's hard to be optimistic. Microsoft (Nasdaq: MSFT) set the stage for bad news last week as several executives warned investors about slow PC sales. Analyst firm Gartner says that fourth-quarter PC sales were 1.4% below the year-ago quarters, thanks to hard drive shortages. That flooding in Thailand hurts. But Mr. Softy thinks Gartner's numbers are too optimistic.

Since Intel's fortunes are in some ways just as linked to the PC as Microsoft's, that's a grim view. Chipzilla also supplies processors to the Apple (Nasdaq: AAPL) Mac lines, but the hard drive shortages should dampen that market as well. We're told that Apple's mobile gear is selling like gangbusters, but Intel doesn't have much of a toehold there, just a handful of inexpensive radio signal handlers per iPad.

That being said, the Wall Street crowd currently expects Intel to deliver about 20% year-over-year sales growth and modestly higher earnings. At that rate, revenue won't have slowed down at all from recent quarters:

Intel Corporation Revenue Growth Chart by YCharts

As this chart shows, Intel has a knack for delivering solid sales growth even when software partner Microsoft and the two largest system builders in America can't. In fact, rare is the quarter when Hewlett-Packard (NYSE: HPQ), Dell (Nasdaq: DELL), or Redmond manage to outpace their main chip supplier's revenue growth.

The computer industry seems very loosely tied in this light. Each company has its own horde of demons to battle, and those personal wars override sector effects to a large degree. It's quite possible for HP and Dell to outperform when Microsoft is on the ropes, and for Intel to show yet another unique performance profile. Don't forget that a global network of distributors and system builders can stockpile plenty of Intel products while the hard drive storm blows over, thus softening the quarter-by-quarter impact on Intel itself. Channel stuffing is an ugly tactic, but Intel has been known to play dirty when needed. Maybe this is one of those times.

Tonight's the night
We'll get the full lowdown tonight. Well, maybe no direct update on channel stuffing, but do keep an eye out for comments on inventories in the sales channels. Even with some aggressive inventory management, the numbers should look disappointing. After all, only one analyst firm (out of 42 who publish an earnings estimate) has lowered its bottom-line estimates in the last 30 days. Moreover, Intel shares have soared 14% over the last six months, handily crushing the market. Most of these gains came during the Thai hard drive disaster. The Street is setting itself up for a surprise it won't like at all.

If Intel does disappoint and investors send the stock down to the basement, that would probably be a great time to buy in. Unless management unveils some hitherto unknown structural flaw that would merit lower prices, we're looking at a fundamentally sound company with healthy long-term cash flows and that buoyant revenue stream we already discussed.

Trading at just 11 times trailing earnings and with a generous 3.3% dividend yield to boot, Intel is a very deep value play. No short-term bumps in the road are going to change that. It's the kind of ultra-dependable stock you can build a retirement portfolio around, just like these six companies.