Intel Corporation (NASDAQ:INTC) is scheduled to report its Q2 2013 earnings on Monday, July 15. Analysts at Nomura are expecting Intel Corporation (NASDAQ:INTC) to guide EPS in line with the Street as better gross margin offsets weaker revenue. This along with lower capex likely supports the stock through earnings next week. That said, analysts at research firm remain cautious on Intel Corporation (NASDAQ:INTC) as they see meaningfully lower ASPs compressing revenue over the longer term.

Intel

Details Of Intel’s Estimates

Nomura’s estimates increase from $0.47 to $0.50 in Q3 and from $1.75 to $1.84 in CY13. Their CY14 estimate is unchanged at $1.90, versus consensus of $2.02.

Analysts expect gross margin to improve from 58.0% in Q2 to 61.5% in Q3 and 63.0% in Q4. One of the biggest drivers is the reversal of inventory reserves.

Between 4Q12 and 2Q13E, analysts estimate that Intel Corporation (NASDAQ:INTC) will record inventory reserves of 300bps. Those charges should largely reverse over the next two periods. In other words, Intel should benefit from the sale of previously written-off inventory to the tune of 150bps per quarter. In addition, Intel Corporation (NASDAQ:INTC) should recoup 450bps in startup costs over 2H13.

Intel Will Guide Down Q3 Sales

That said, analysts at Nomura continue to believe that Intel Corporation (NASDAQ:INTC) will guide down Q3 sales. Firm’s forecast of $13.5bn (+4.5% qoq) is below consensus of $13.7bn (+6.6% qoq). They believe uptake of Haswell has been lower than the company’s expectations. In addition, OEMs may wait for Bay Trail parts in the fall to build volume SKUs for the fourth quarter.

The silver lining is that if true Intel Corporation (NASDAQ:INTC) likely brings down capex, much like in Q1.

Nomura’s $18 price target is based on a multiple of 11x CY14. Intel Corporation (NASDAQ:INTC) is currently trading at 12x, in line with a 5-year average and 56% above a low of 8x.