After the market closed Thursday, Intel (INTC +23.60%) reported its quarterly results and issued financial guidance for the first quarter of 2015. The company reported revenue of $14.7 billion for the fourth quarter, exactly in-line with the midpoint guided to last quarter. Intel also saw gross profit margins for the quarter come in better than expected, which the company attributes to higher average selling prices and lower factory start-up costs, with lower platform volumes negating a portion of the increase.
The fourth-quarter results were a bit better than expected and, overall, a solid quarter. Where investors seem to be having a problem is on the financial outlook given for the first quarter of 2015. In particular, Intel guided to $13.7 billion in sales and is calling for 60% gross profit margin at the midpoint of the range.
Analyst consensus for revenue sat at $13.77 billion ahead of the report, so this is a slight miss although I must confess that I find it hard to get worked up over a $70 million revenue miss in the context of a $13.7 billion revenue quarter.
That said, Intel appears to be delivering on what it had previously guided to at its investor meeting and I'd hardly call the company's first quarter revenue outlook "weak."
First-quarter guidance looks fine; full-year guidance reiterated
At the investor meeting in November 2014, Intel had guided to revenue growth in 2015 of "mid-single digits" and gross profit margin of 62% at the midpoint of its range. If Intel just hits the $13.7 billion revenue level next quarter, then this would imply 7% revenue growth year over year, which is at the high end of "mid-single digit" growth.
Intel on Thursday reiterated its full-year 2015 guidance of "mid-single digit percentage" revenue growth (meaning 5%-7%) and gross profit margin guidance of 62% at the midpoint. There does not appear to be any change in Intel's expectations for 2015 from the November investor meeting, and the first-quarter numbers from a revenue and gross profit margin perspective look to be right on track to where they need to be.
Take the long-term view
In the near term, I think expectations may have been elevated for Intel stock. As I wrote previously, while Intel may have been a value play before its huge run-up over the last year or so, right now it's a "growth at a reasonable price" stock. It's not likely to have the crazy volatility that one might see in a young, hot chip stock, but at the same time, I do think that Intel can still deliver on the "growth" part of "growth at a reasonable price."
Over the next year or two, I'm looking for the company to continue to grow its very lucrative data center business at double-digit rates (management is aiming for a 15% compounded annual growth rate through 2018), and I'm looking for the PC market to eventually be a stable 1%-3% grower over time.
In the mobile market, I'm looking for the company to execute better. The company has lots of smart engineers, lots of money, and great manufacturing technology. What the company needs to work on, though, is developing products that meet the requirements of a broad range of smartphone and tablet vendors and getting those products out in time to compete.
The story still looks good
At the end of the day, Intel's earnings report was good for long-term investors: Things seem to be playing out as outlined at the company's investor meeting late last year. While investors looking for instant gratification following the report probably aren't going to get it (it takes a lot to move a behemoth like Intel), I think after a solid start, 2015 should be a good year for Intel.
