Intel Corporation (NASDAQ:INTC)’s third-quarter upside to the revenue guidance is backed by corporate demand in both PCs and DCG, and renewed commitments to shareholders. However, for the stock to outperform the group “here we will need to see consumer PC demand resume in Q3/Q4 and a clear path to profitability for MCG” that posted year to date losses of $2.05 billion, according to Wedbush analysts Betsy Van Hees and Ryan Jue, in a report dated July 16, 2014.
Growth fueled by PC demand
Intel Corporation’s second-quarter results were at the high-end of the updated guidance. The company posted GAAP Earnings per share of $0.55 on revenue of $13.8 billion, an increase of 8.4% quarter over quarter, better than the guidance of $13.7 billion, and also above the analyst’s estimate of 13.7 billion revenue and EPS of $0.54.
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The PC segment, which is the core business segment of the Intel, was a significant contributor as the demand surged. Gross margin came in at 470-basis points for the second quarter to 64.5%, a rise from 59.7% on the back of higher volumes, lower costs and push out of 14nm start -up costs.
Also, the chipmaker is increasing the repurchase of shares to $20 billion with plans to buy $4 billion in the third-quarter and a similar amount in the fourth-quarter. Shareholders should be positive as the company is seeing better corporate demand in both PC and DCG.
Estimates raised for Intel
Intel revenue outlook for the third-quarter is also, above, the expectations fuelled by strong corporate upgrade of the PCs. Revenue outlook for the third-quarter of $14.4 billion is higher than the street estimates, and also above the analysts’ estimates of $14.1 billion.
Intel guided Gross margin to be more or less at 66%, above 150-basis points quarter over quarter and above the estimates of 63.5%. Management expects operation expenditure to be $4.9 billion above analyst’s estimates of $4.8 billion.
For the full year, Intel raised the revenue outlook to be around 5% year over year from the previous outlook of a flat year over year and full year gross margin to be 63%, marginally higher than the prior outlook of 61%. Analysts have, also, increased the third-quarter and full year 2014 and 2015 on better than expected guidance.
Wedbush analysts had a Neutral rating and raised the price target to $34 (from $30).