2 Things to Watch For When Intel Reports Earnings

Intel (NASDAQ: INTC  ) likes to race early out of the gate every earnings season, and this brand-new reporting bonanza is no exception. Intel reports third-quarter results after Tuesday's closing bell, with only a handful of major reports paving the way.

These two details should be at the top of Intel investors' minds when this report hits the news wires:

Fresh growth
The widely reported "death of the PC" has slowed Intel's revenue and earnings growth to a crawl in recent quarters. In fact, both trends have been negative since early 2012.

INTC Revenue TTM Chart

INTC Revenue TTM data by YCharts

For the third quarter, Intel's management pointed to roughly $13.5 billion in total sales, which would make the year-over-year comparison straighter than a ruler. Wall Street analysts largely agree.

Sales numbers above the midpoint of Intel's guidance range will come as a shock to the Street and would probably drag earnings into a positive surprise scenario as well. Intel doesn't play the panic-sale discount game and expects gross margins to increase slightly this time.

And here's the thing: Market research firm Gartner says the PC market is shrinking slower than expected. In fact, the top three system builders actually increased their unit sales in the third quarter, according to Gartner's research.

That's why I expect a strong revenue report this week. This is the single most important number to watch.

Return of dividends
Intel has a very long history of annual dividend increases. Come good times or bad, the company keeps pumping more and more cash back into investors' pockets. This uninterrupted streak stretches all the way to 1992.

Except time is running out to boost the dividend in 2013. The payout has stayed flat at $0.225 per share since the middle of 2012.

INTC Dividend Chart

INTC Dividend data by YCharts

Since strong and growing dividends form an important pillar in my own investment thesis for Intel, I'd like to hear management explain where the dividend is going.

I understand that the company is protecting its cash flows to some extent, pulling back on capital expenses for the rest of the year and even holding the expected dividend raise back. CEO Brian Krzanich says we should expect an update on the cash strategy in November's investor meeting. In the meantime, rest assured that Intel "has a strong record of cash flow generation and returning that cash to [its] owners."

OK, fine. But I'm growing impatient over here. Watch Intel's free cash flows like a hawk, and look for any signs of higher capital expense spending or dividend payouts -- the two should go hand in hand.

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