Intel Analyst Roundup

Intel Corporation INTC reported fourth quarter and full year results after the closing bell on Thursday. Summary of Fourth Quarter Results:

• Revenue beat estimates of $13.72 billion at $14.02 billion, up 8% y/y.
• Intel reported EPS of $0.51 versus the estimated $0.52
• PC Client Group generated $8.6 billion in sales during the quarter, up 2% sequentially and flat year over year.
• Intel's Data Center Group (DCG) generated $3 billion in sales, up 8% year over year and a 3% sequential gain.”

Summary of Full Year Results:

• Intel reported a 1.2% decline in revenues.
• Full year gross margins were down 235 basis points over 2012 levels.
• The company's earnings per share dropped from $2.13 to $1.89>
• Intel generated $20.9 billion in cash from operations.
• The company used $2.1 billion to repurchase 94 million shares of stock and paid $4.5 billion in dividends.

Analyst Comments:

• Wells Fargo senior analyst Maynard Um noted “Intel PC comments echo corporate strength and some consumer stabilization.” Um commented on PC demand, upside in desktops, and in-line results for notebooks. The analyst added that near-term strength in PCs will likely continue into 1Q14, but visibility in the back half of 2014 is limited.
• FBR Capital Markets analyst Christopher Rolland commented that although fourth quarter revenue was above the Street's estimates, datacenter revenue and DCG units disappoint. Rolland reported that the using the federal shutdown as an excuse for disrupted spending sounds like a “bad excuse” (although common among FBR's networking contacts). “Given the recent stock run, shares had set up poorly into the print and could be punished more meaningfully this morning. However, we think INTC may work higher through the quarter, particularly as more incrementally positive PC data is revealed monthly,” the analyst continued, “Moving forward, we are increasingly confident that Intel can opportunistically extract value from the extra transistors afforded to it through the best silicon manufacturing operations in the world.”
• Jonathan Hodgkinson, an analyst from Nomura Holding America Inc., viewed Intel's results as “not high quality.” Hodgkinson noted an upward bias to fourth quarter estimates. The analyst commented that Intel stated that PC revenues will continue to decline mid-single digits despite better PCG results.
• Topeka maintains a bullish view, writing “While enterprise spending was slightly weaker than expected, we believe the underlying trends are favorable, and expect improvement into 2014. We also believe that overall INTC gross margin resilience demonstrates the Company's competitive client strength, despite an increasing mix of low power client form factors.”
• Analyst Kevin Cassidy from Stifel remains positive on Intel. Cassidy reported on the stabilization of the PC market, a “robust” Cloud and Storage market demand, the assumption that unit shipments will increase, and converging notebook and tablet forms making “it difficult to split apart the market.”
• Credit Suisse reported that results are “not good enough”. Analyst John Pitzer commented that these results are disappointing following “several upgrades, improving PC supply chain data points and a stock that has outperformed the broader market by 2x since the early December.” Pitzer noted two main concerns including DCG missing guidance for the second consecutive quarter and the fact that PCCG upside war driven in part by DT.
• Morgan Stanley analyst Joseph Moore remains cautious on Intel. The analyst focused on the weakness in notebooks and a stagnant desktop market. Moore reported that he expects PC unit declines to slow in 2014 and expects a slight unit growth in 2015. Morgan Stanley noted on a few risks including the risk of the enterprise PC market slowing and tablet cannibalization returning to the consumer. In addition, Intel is expensive relative to peers and Moore does not see net earnings contributions from foundry, tablets and smartphones by 2016.

Intel closed at $26.54 on Thursday and shares have traded as low as $25.25, down 5.109%.