Intel Corporation (NASDAQ:INTC): Q4 Results & Outlook Mixed As Stabilizing PC Markets Were Offset By Unexpected Weakness in Enterprise
What to do with the stock. Intel Corporation (NASDAQ:INTC) reported mixed Q4 results with revenue beating but GAAP EPS a penny below expectations primarily due to higher OpEx. Even though Q1 revenue guide was in-line with the Street, the midpoint of guidance ranges implies a miss to GAAP EPS expectations. Intel Corporation (NASDAQ:INTC) reiterated roughly flat Y/Y revenue guide for 2014; however, earnings are starting off the year at a much lower than expected pace with the 2H:14 continuing to look very backend loaded. While the 4% dividend yield remains very attractive, particularly for investors with a longer-term horizon, we recommend investors let the stock settle out as we look for better visibility on the revenue trajectory from DCG and meaningful revenue contributions from Intel’s new initiatives.
Mixed Q4 results with top line beating, but GAAP EPS a penny below. Revenue of $13.83B was above the midpoint of the guidance range of $13.7B +/- $500MM (-2% to 5% Q/Q) and the Street and our estimates of $13.7B, but GAAP EPS of $0.51 was a penny below the Street and our estimate of $0.52. INTC noted the PC market was stabilizing in the 2H with Q4 PC units up Y/Y, but noted enterprise in DCG fell short of expectations due to a lower rate of recovery among corporate buyers. Q4 GM slightly decreased by 40bps to 62% from 62.4% in Q3 above guidance of 61% +/- a couple points and Q4 OpEx increased $120MM Q/Q to $4.83B from $4.71B in Q3 well above the guidance of $4.7B.
Intel Corporation (NASDAQ:INTC) guides Q1 revenue in-line, but implied GAAP EPS below; reiterates 2014 revenue outlook of flat Y/Y. Q1 revenue outlook of $13.8B +/- $500MM (-11% to -4% Q/Q) was in-line with the Street and our estimates of $12.8B and historical seasonality. Q1 GM was guided to be 59%, +/- a couple points, down 300bps Q/Q and below our estimate of 59.5% and OpEx to be approximately $4.8B higher than our estimate of $4.67B. We estimate the midpoint of Q1 guidance implies a GAAP EPS of $0.36. Excluding the $200MM restructuring charge, we estimate the midpoint implies an EPS of $0.39 still below the Street and our estimates of $0.42. INTC reiterated its 2014 revenue outlook of roughly flat Y/Y. We are adjusting our Q1 and full year 2014 and 2015 estimates, (see Figure: 2).
Maintain NEUTRAL rating and $27PT. Our 12-month PT of $27 (unchanged) is based upon about a 12x (unchanged) multiple of our 2015 GAAP EPS estimate of $1.90 (from $1.95) plus $3.94 (from $3.75) of cash per share.