Did Intel's Earnings Report Deliver Where It Counts?

Intel (NASDAQ: INTC  ) just reported third-quarter results, and the stock didn't really react. Intel's chart squiggled up and down all day, generally just below the general market's politically fueled rally. The stock closed up a modest 1.3%.

It's an ambivalent response to an ambiguous report. Intel reported $13.5 billion in sales, right at the midpoint of its own guidance, and on the nose of analyst targets. That's a solid, if unspectacular, performance, but somewhat disappointing in light of recently rosy PC-market reports.

Intel wasn't inside as many of these boxes as the author expected.

On the other hand, earnings jumped 49% year over year, landing at $0.58 per share. That's far ahead of Wall Street's $0.51 targets, driven by surprisingly strong gross margins. Rising average unit prices added 0.5 percentage points to the gross-margin picture.

If that bad news/good news combo doesn't have your head spinning yet, just wait for Intel's next-quarter guidance. The revenue target range centers around $13.7 billion, significantly below analysts' $13.9 billion estimate. Moreover, Intel's management would be surprised to see those strong gross margins sticking around -- the top end of that guidance range is just a smidge above the third-quarter's actual result.

Before the report, I suggested that investors should look for two things above all else: Strong revenues, and some sign of a renewed dividend commitment. Intel struck out on the first point by barely meeting internal and Wall Street targets.

Unfortunately, Intel disappointed on the dividend front, as well. Management didn't mention its forward dividend or buyback plans, and the report included only a partial cash flow statement. In short, Intel did nothing at all to reassure nervous investors, like yours truly, that the paused dividend growth will resume any time soon.

Like I said, I'm getting nervous. The positive surprises in this report come from market-driven details like selling prices. Management doesn't have full control of these inputs, and guidance numbers say that the good times may not be sustainable.

Archrival Advanced Micro Devices (NYSE: AMD  ) saw its share price jump 1.5% higher on Intel's report. No, Advanced Micro Devices didn't do or say anything awesome to deserve this market-beating jump. AMD reports its own results on Thursday night.

Today's market reaction says that Advanced Micro Devices investors smell opportunity in Intel's mixed messages. If third-party PC-market reports point to reasonably strong sales, but Intel comes up short, then AMD will pretty much have to provide the missing chips. Keep an eye on Advanced Micro Devices' report to confirm -- or refute -- this theory.

In the meantime, I'm getting nervous about Intel's commitment to shareholder-friendly policies. If the company needs to conserve cash right now, then fine... just come out and say so. Instead, we're getting stonewalled.

I'm not likely to panic and sell my Intel holdings at this point, but CEO Brian Krzanic is on notice: If I don't see some solid dividend-supporting language in next month's investor meeting, I'll take that as Intel's board and management lacking confidence in the long-term business plan.

Where are the great dividend stocks?
With Intel sitting on the fence about raising its dividend, there may be other dividend stocks out there that can make you rich. It's as simple as that. While they don't garner the notoriety of high-flying growth stocks, they're also less likely to crash and burn. And over the long term, the compounding effect of the quarterly payouts, as well as their growth, adds up faster than most investors imagine. With this in mind, our analysts sat down to identify the absolute best of the best when it comes to rock-solid dividend stocks, drawing up a list in this free report of nine that fit the bill. To discover the identities of these companies before the rest of the market catches on, you can download this valuable free report by simply clicking here now.


Read/Post Comments (3) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 16, 2013, at 7:41 PM, jljaynes wrote:

    "Archrival Advanced Micro Devices (NYSE: AMD ) saw its share price jump 1.5% higher on Intel's report. No, Advanced Micro Devices didn't do or say anything awesome to deserve this market-beating jump." -- the overall market was up 1.4% today.

    https://www.google.com/finance?q=INDEXDJX%3A.DJI%2CINDEXSP%3...

  • Report this Comment On October 17, 2013, at 9:23 AM, SnarfJabroni wrote:

    "in light of recently rosy PC-market reports."

    "If third-party PC-market reports point to reasonably strong sales, but Intel comes up short, then AMD will pretty much have to provide the missing chips."

    I have seen no such ROSY PC market reports?

    PC sales down 6 quarters in a row, and all I hear is that it is in the process of bottoming...this doesn't sound rosy to me? Maybe you can provide some specifics on these so-called third party reports?

  • Report this Comment On October 17, 2013, at 12:18 PM, wownwow wrote:

    Just getting nervous? Wait to see how Intel fill its mega fabs :)

Add your comment.

DocumentId: 2686315, ~/Articles/ArticleHandler.aspx, 4/21/2014 3:08:00 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement