Intel Corporation (INTC) Q4 Earnings Preview

Intel Corporation (NASDAQ:INTC) is scheduled to report its fourth quarter and full year 2013 earnings on Thursday, January 16. PC sales witnessed an improved in Q4 last year amid corporate refresh cycle and the retirement of Windows XP. That should boost Intel Corporation (NASDAQ:INTC)’s earnings in the December quarter. But enterprise IT spending and Windows XP obsolesce is a short term phenomenon. So, the March quarter will be a real test for the chipmaker, when PC sales are expected to decline 6% QoQ.

Intel to report a healthy Q4

For the fourth quarter, RBC Capital Markets expects the Santa Clara-based company’s revenue to rise 2% QoQ to $13.74 billion, compared to the Wall Street consensus of $13.72 billion. RBC analysts Doug Freedman and Earl Hege estimates Intel Corporation (NASDAQ:INTC)’s fourth quarter gross margins at 61.3%, slightly better than the consensus estimate of 61.1%. Meanwhile, RBC and consensus both expect the company’s earnings to come at $0.52 per share. Freedman and Hege said in a research note to investors that revenues may go slightly higher given strong PC sales in Q4 and the ongoing data center strength.

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For the first quarter of 2014 (or March quarter), RBC expects Intel Corporation (NASDAQ:INTC)’s revenues to decline 6% QoQ to $12.92 billion vs. Wall Street consensus of $12.78 billion. Its gross margins are expected to come at 59.2% compared to the consensus estimate of 58.8%. Intel Corporation (NASDAQ:INTC)’s earnings are expected to dip to $0.44 per share, while Wall Street estimates the figure at $0.42.

PC sales to stabilize after 2016?

Research firm Gartner estimates PC sales in Q4 to 82.6 million. But RBC Capital Markets says PC market is unlikely to show any signs of growth before 2016. Freedman and Hege estimate PC shipments to decline 11% YoY in 2013 to 317 million units, and skid another 4.4% in 2014 to 304 million units. But the decline is expected to stabilize in the 1-2% range after 2014.

Intel PC

Analysts remain concerned about Intel Corporation (NASDAQ:INTC)’s plans to offer subsidies in the tablets market to gain market share. This method doesn’t support the ROI. RBC Capital Markets estimates that Intel Corporation (NASDAQ:INTC) is spending more than $2 billion a year in its attempt to gain market share in tablets and smartphone businesses. RBC Has a Sector Perform rating on the stock with $26 price target.

Intel Corporation (NASDAQ:INTC) shares surged 2.71% to $26.19 at 9:54 AM EST.