Intel reported second-quarter earnings last night that looked quite healthy. The company shipped a record number of microprocessors during the quarter, and it appears sales and profit growth are on track for the rest of the year.
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Below is an abbreviated recap of the numbers the company reported:
(millions) Q2 2000 Q2 1999 Change
Sales $8,300 $6,746 23.0%
Gross Profit $5,017 $4,006 25.2%
Operating Income $2,408 $2,320 3.8%
Net Income $3,137 $1,749 79.4%
Diluted EPS $0.45 $0.25 80.0%
Sales were up to a new all-time high in the second quarter, thanks largely to the fact the company shipped a record number of microprocessors and flash memory units in the quarter. The company also indicated it expected sales to be even higher in the third quarter.
Intel's gross profits were also up nicely, with the increase in gross profits slightly outpacing the year-over-year gains in sales. The company indicated that third-quarter gross margins should be approximately 63-64%, which would be an impressive showing if achieved.
Operating income was only up slightly year-over-year, but this was because Intel reported $415 million in acquisition-related expenses. Looking beyond these expenses, operating income would have been $2.823 billion, up 21.7%.
Total net income came in at $3.1 billion, up an astonishing 79.4% from last year. Intel's net income did include significant gains that the company booked on its investment portfolio to the tune of $2.3 billion. These gains were largely thanks to the company's profitable investment in fellow semiconductor firm Micron Technology (NYSE: MU).
When all of this is combined, the company earned $0.45 per share, up nicely from last year's $0.25. Intel is reporting its per-share earnings on a post-split basis (per accounting rules) even though the company's stock does not start trading on a post-split basis until July 31 when the stock will split 2-for-1.
As one of the most widely held stocks in the nation and one that holds a prominent position in several important indices -- including the S&P 500, the Nasdaq Composite, the Dow Jones Industrial Average and, of course, The Motley Fool's NOW 50 Index -- the fact that Intel reported positive numbers is quite important to the market's overall health. In the long run, a stock's value is determined by how much cash its underlying business can generate. Intel bringing home the bacon largely validates its $500 billion market capitalization.
Going forward, it looks as if everything is on track at Intel. The company gave quite extensive guidance concerning what to expect for the balance of the year in its earnings press release (a must-read), and it certainly looks like Intel will continue to grow both its top and bottom lines in the near future. Attaining its full-year profit estimates of $1.68 (post-split) looks to be a layup for Intel. Long-term investors in Intel can relax because it appears that the company's growth is on track.
Tonight, Rule Maker Phil Weiss will take a much closer look at Intel's numbers in the Rule Maker Portfolio recap. We've merely scratched the surface here, so make sure to tune back in.
Your Turn:
What do think were Intel's "real" earnings per share in the second quarter? Should analysts and investors take Intel's cue and exclude acquisition-related costs and include investment-related gains in their estimates? Take our poll.
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