After putting together a trio of earnings wins over the past three quarters, Intel (NASDAQ:INTC) tries to make it four-for-four on Tuesday. First-quarter 2007 earnings are due out today.

What analysts say:

  • Buy, sell, or waffle? Not that Wall Street seems to mind. The 37 analysts tracking Intel probably appreciate the extra time as they queue up to sneak a peek at the company's earnings news. At last report, 20 of these analysts rated Intel a buy, 15 more a hold, and only two a sell.
  • Revenues. On average, analysts expect 0.7% sales growth, $9.01 billion in all.
  • Earnings. Meanwhile, profits are predicted to drop a penny to $0.22 per share.

What management says:
In one of those rare cases when a letter from the IRS bears good news, Intel announced late last month that the conclusion of an audit of its 1999 to 2002 tax filings, combined with a resolution of a dispute over tax benefits for export sales from 2003 to 2005, will result in a $275 million reduction of its taxes for this fiscal year, reducing its income tax rate below the previously expected 30%.

This should not, however, affect most of the earnings guidance provided in last quarter's earnings report. Specifically, gross margins are still expected to come in around 49% in today's news, and to rise to 50% by year's end. Pre-tax operating costs are still expected to average about $2.7 billion per quarter. And Intel still intends to invest about $5.5 billion in capital expenditures this year, $700 million or so more than its depreciation costs, but down from the $5.8 billion it averaged in 2005 and 2006.

What management does:
Good news? Not the way I look at it. We've got capital expenditures exceeding depreciation, a situation suggesting that net income will again exceed free cash flow this year. Meanwhile, GAAP margins are expected to continue the downward trends reflected below -- gross margins look to fall another 250 basis points over the course of this year, a trend that will likely cascade down the income statement to keep operating margins falling as well. If the net improves in 2007, be aware that this could be entirely a result of the tax benefit Intel expects.

Margins

10/05

12/05

4/06

7/06

9/06

12/06

Gross

58.9%

59.7%

59.0%

58.4%

55.6%

52.5%

Operating

31.6%

31.5%

29.5%

27.1%

24.0%

21.4%

Net

21.8%

22.3%

20.5%

18.0%

16.7%

14.3%
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
If none of this sounds especially reassuring to Intel shareholders (of which this Fool is one), then they can at least count themselves lucky that they're not shareholders of, say, Intel archrival AMD (NYSE:AMD). As related in his February update on Intel, Motley Fool Inside Value lead analyst Philip Durell "felt the pain" of AMD owners when he reassured us that, while Intel's Q4 margins might have fallen sharply to 50%, AMD's had fallen even harder -- collapsing to 36%.

That lends credence to Philip's conclusion that brighter days just have to be around the corner. Both parties want to profit from their recent inroads into their respective new buyers -- Dell (NASDAQ:DELL) for AMD, and Sun (NASDAQ:SUNW) and Apple (NASDAQ:AAPL) for Intel. With AMD generating an operating profit margin of just 3% last quarter, that company must soon realize that fighting a price war with Intel is in neither party's best interest. Someone will cry "Uncle!" first, which should permit both combatants to get their margins moving upward again.

What did we expect out of Intel last quarter, and what did we get? Find out in:

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Fool contributor Rich Smith owns shares of Intel but of no other company named above. The Fool has a disclosure policy.