Intel Corporation Shares Surge On Earnings, Price Target Increase

Intel Corporation (NASDAQ:INTC) released its second quarter results this week, and Deutsche Bank analysts are impressed. In a report dated July 15, 2014, they increased their price target for the chip maker from $35 to $40 per share and reiterated their Buy rating.

Intel continues positive momentum

Analyst Ross Seymore and associate Matt Diamond call Intel’s second quarter results “strong” and note that the company’s third quarter guidance exceeded expectations. They are now more confident in their bullish view on the company, which they say is based on improving demand, conservative guidance and improving cash generation.

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They note that Intel Corporation (NASDAQ:INTC) significantly increased its share repurchase authorization to $20 billion, which is about 13% of the company’s market capitalization. The chip maker expects to buy back $4 billion worth of shares in the third quarter, suggesting a focus on returning capital to shareholders. They expect this fact to be well-received by long-term investors, and with today’s share price increase, it seems like this is true.

Intel’s results slightly more positive

Intel posted second quarter revenues of $13.83 billion, an 8% sequential increase. That’s a little higher than the midpoint of the company’s previously provided guidance of between $13.4 billion and $14 billion. It’s also a little higher than Seymore’s estimate at $13.67 billion. Gross margins increased 5 points sequentially to 64.5%. Earnings per share were 55 cents, higher than his estimate of 51 cents per share.

The analyst believes Intel will hit its target for 40 million tablet unit shipments this year. However, he is disappointed that the company has again delayed its LTE ramp to the fourth or first quarter.

Increasing estimates for Intel

Intel Corporation (NASDAQ:INTC) guided third quarter revenues to rise 4% sequentially to $14.4 billion, higher than his estimate of a 2% increase. The chip maker projects a better gross margin as well, at 66% compared to his estimate of 64.5%, citing lower unit costs and higher volumes.

Because of these numbers Seymore raised his estimate to third quarter revenue of $14.4 billion and earnings of 64 cents per share. His previous estimates were $13.97 billion in revenue and 58 cents per share in earnings. His full-year estimates go to $55.4 billion in revenue, a 5% increase year over year, and earnings of $2.17 per share. His previous estimates were $54.59 billion in revenue and $2.05 per share in earnings.