The No. 1 semiconductor company should meet, and maybe beat, 2Q forecasts. But will that be enough?
Intel Corp. will need to live up to increasingly ebullient forecasts when it reports its second-quarter results on Tuesday.
It's hard to find anyone on Wall Street with something negative to say about the world's largest semiconductor manufacturer. Shares of Intel (INTC: Research, Estimates) are up 55 percent year-to-date, making it the second-best performing stock in the Dow Jones industrial average.
Earnings estimates for this year and next are on the rise as hopes continue to build that big corporations will finally start spending more heavily on personal computers, laptops, servers and other devices that feature Intel's microprocessors.
For the second quarter, analysts are expecting sales of $6.7 billion, up from $6.3 billion a year ago. Wall Street is predicting earnings of 13 cents a share, compared with a profit of 9 cents a share in last year's second quarter.
But David Wu, an analyst at Wedbush Morgan, thinks Intel could easily earn 14 cents a share and that revenues could be closer to $6.8 billion, the high end of Intel's sales guidance.
More importantly, investors will be listening carefully for comments about whether or not the second half of the year, which is typically stronger for Intel, will be even better due to a pickup in demand. Wu thinks the company will have some good news there as well.
"Fundamentally, this company depends on capital spending coming back, and I think IT spending will come back in the fourth quarter," said Wu.
And it seems like many on Wall Street have decided that a second-half comeback is a fait accompli. John Lau, an analyst with RBC Capital Markets, raised his sales estimate for the third quarter to $7.16 billion, slightly ahead of the Wall Street consensus of $7.1 billion.
Demand for notebooks and servers should fuel Intel's results going forward, according to Lau. Intel launched its Centrino chipset for wireless notebooks in March and the company has said that sales have been strong.
Continued strength in notebook chip sales is especially crucial for Intel because this market segment is growing faster than traditional desktop PCs. In addition, the average selling price of notebook chips tends to be higher, which boosts profit margins.
On the server side, Intel has been doing battle with struggling rival Advanced Micro Devices (AMD: Research, Estimates), whose Opteron line of server chips competes with Intel's Itanium processors. Lau thinks, however, that Intel is gaining pricing power in this market.
AMD will report its second-quarter earnings on Wednesday and is expected to post a loss of 54 cents a share.
Will Intel be treated like Yahoo?
Still, even though Intel is widely expected to record solid numbers for the second quarter and possibly raise guidance for the third quarter and beyond, Joe Basset, an analyst with the One Technology Group fund, wonders whether Intel can do enough to satisfy the momentum investors who have helped fuel Intel's massive runup.
The fund owns Intel, and Basset said that Intel has clearly positioned itself well for an eventual upturn. But he thinks that the stock could wind up suffering a similar fate as Yahoo! did last week.
The Internet media company posted incredibly strong results, but shares plummeted the following day since Yahoo! did not beat earnings estimates or raise its guidance substantially.
"People have been so rabid in buying Intel and other chip stocks that some lofty expectations have been built into lot of these stocks," said Basset. "There should be an opportunity for Intel to say decent things about the second half of the year, but the risk is whether or not that will be enough."
Intel Corp. will need to live up to increasingly ebullient forecasts when it reports its second-quarter results on Tuesday.
It's hard to find anyone on Wall Street with something negative to say about the world's largest semiconductor manufacturer. Shares of Intel (INTC: Research, Estimates) are up 55 percent year-to-date, making it the second-best performing stock in the Dow Jones industrial average.
Earnings estimates for this year and next are on the rise as hopes continue to build that big corporations will finally start spending more heavily on personal computers, laptops, servers and other devices that feature Intel's microprocessors.
For the second quarter, analysts are expecting sales of $6.7 billion, up from $6.3 billion a year ago. Wall Street is predicting earnings of 13 cents a share, compared with a profit of 9 cents a share in last year's second quarter.
But David Wu, an analyst at Wedbush Morgan, thinks Intel could easily earn 14 cents a share and that revenues could be closer to $6.8 billion, the high end of Intel's sales guidance.
More importantly, investors will be listening carefully for comments about whether or not the second half of the year, which is typically stronger for Intel, will be even better due to a pickup in demand. Wu thinks the company will have some good news there as well.
"Fundamentally, this company depends on capital spending coming back, and I think IT spending will come back in the fourth quarter," said Wu.
And it seems like many on Wall Street have decided that a second-half comeback is a fait accompli. John Lau, an analyst with RBC Capital Markets, raised his sales estimate for the third quarter to $7.16 billion, slightly ahead of the Wall Street consensus of $7.1 billion.
Demand for notebooks and servers should fuel Intel's results going forward, according to Lau. Intel launched its Centrino chipset for wireless notebooks in March and the company has said that sales have been strong.
Continued strength in notebook chip sales is especially crucial for Intel because this market segment is growing faster than traditional desktop PCs. In addition, the average selling price of notebook chips tends to be higher, which boosts profit margins.
On the server side, Intel has been doing battle with struggling rival Advanced Micro Devices (AMD: Research, Estimates), whose Opteron line of server chips competes with Intel's Itanium processors. Lau thinks, however, that Intel is gaining pricing power in this market.
AMD will report its second-quarter earnings on Wednesday and is expected to post a loss of 54 cents a share.
Will Intel be treated like Yahoo?
Still, even though Intel is widely expected to record solid numbers for the second quarter and possibly raise guidance for the third quarter and beyond, Joe Basset, an analyst with the One Technology Group fund, wonders whether Intel can do enough to satisfy the momentum investors who have helped fuel Intel's massive runup.
The fund owns Intel, and Basset said that Intel has clearly positioned itself well for an eventual upturn. But he thinks that the stock could wind up suffering a similar fate as Yahoo! did last week.
The Internet media company posted incredibly strong results, but shares plummeted the following day since Yahoo! did not beat earnings estimates or raise its guidance substantially.
"People have been so rabid in buying Intel and other chip stocks that some lofty expectations have been built into lot of these stocks," said Basset. "There should be an opportunity for Intel to say decent things about the second half of the year, but the risk is whether or not that will be enough."
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