This article first appeared on GuruFocus.
Intel (NASDAQ:INTC) heads into earnings with a demanding price tag. Shares traded at $92.855, down approximately 2.80% at 10.30am EST on October 29, ahead of its scheduled earnings report after the 4 p.m. ET market close. The question for investors: how much of the chipmaker’s improving sales is reaching the bottom line?
Management’s third-quarter guidance called for revenue of $15.8 billion$16.8 billion, adjusted earnings of $0.38 per share and an adjusted gross margin of 42.0%. That earnings target sits approximately 9.5% below the previous quarter’s $0.42. Revenue at the midpoint would exceed the preceding quarter’s $16.1 billion, but the lower earnings target suggests that additional sales may not translate into stronger per-share profits.
The valuation adds pressure. The October 29 GF Value snapshot places Intel’s estimated value at $32.55, putting the $92.855 share price 185.27% above that benchmark. That estimate is one valuation measure, but the gap suggests investors are paying for substantial improvement beyond current guidance. Tonight’s results could help test those expectations: stronger factory utilization and a more profitable product mix would offer better support for the premium than higher sales alone.
