'It's A Hard Rain's A Gonna Fall' Come Intel, AMD Earnings, Bernstein Warns

In a recent research note, Bernstein analysts Stacy A. Rasgon, Shirley Hu and Yang Ren preview Intel Corporation INTC and Advanced Micro Devices, Inc. AMD’s financial results, both scheduled for next week.

Intel

The experts note that Intel is going through an “interesting” quarter, to say the least. They estimate PCs have weakened “beyond company expectations as of 3 months ago.”

While weak PCs come as no surprise, a number of other elements (some circumstantial, some, not so much) are setting the analysts’ senses “tingling on the prospect for further deterioration,” and lead them to take their numbers down.

Among these additional indicators of a complicated situation at Intel the firm counts:

• Recently announced layoffs
• Unanticipated and somewhat odd executive changes, including the resignations of President Renee James and Mobile executives Hermann Eul and Mike Bell
• The Altera Corporation ALTR acquisition for $17 billion in cash; a deal that looks defensive in nature
• “Incremental reports of both process and product delays”

The experts at Bernstein now model second quarter earnings of $0.50 per share (1 cent below the Street) on revenue of $13 billion, and gross margins of 62 percent, in line with guidance and consensus estimates.

The firm maintains a Market-Perform rating on the shares but, from a tactical perspective, they’d take the under on it if they were forced to go active (i.e. long or short). The price target was trimmed from $32.00 to $29.

Advanced Micro Devices

AMD preannounced its results earlier this week, and Bernstein trimmed its estimates after the event.

The new model suggests AMD will report a net loss of (-$0.15) per share in the second quarter, on revenue of $953 million, down 8 percent quarter-over-quarter, but in line with management’s revised guidance.

The report concludes, “AMD is at a tipping point, with their core PC business under significant pressure from a weak market and increasingly poor competitive position.” Consequently, the analysts maintain an Underperform rating and a $1.50 price target on shares of the company.