Intel Corporation (INTC) Q1 Results Preview: Focus On Product Mix

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Intel Corporation (NASDAQ:INTC) is scheduled to report 1Q 2013 results after market close on Tuesday, April 16th. Conference Call is  scheduled at 5:00 PM EDT/2:00 PM EDT to discuss results.

Intel Corporation (INTC) Q1 Results Preview: Focus On Product Mix

Analysts at Deutsche Bank model 1Q13 at $12.7b (-6% q/q)/EPS $0.43 which implies a GM of 57.9%. This is at the mid-point of company guidance and the analysts note over the past 3 years excluding negative pre-announcements, revenue has not missed the mid-point of guidance by more than $150m and EPS has never been below mid-point of Street. The firm remain slightly above Street’s $12.6b/$0.40 as they believe Intel Corporation (NASDAQ:INTC) product mix continues to be solid (Server and Core i5 mix) and the research firm remain optimistic about Intel Corporation (NASDAQ:INTC) other segments (Software, SSD, Other IA) where the company continues to take share.

Deutsche Bank’s 1Q13E is $13.2b (+4% q/q)/$0.42 which is above Street at $12.9b/$0.41. Analysts at firm expect some acceleration in PC demand as Windows 8 devices reach more mainstream price points and displace Windows RT in the market. Initial W8 devices had price points near $700, compared to $500 for Windows RT. W8 devices based on Clovertrail are now at the $500 price point. They expect the new positioning will drive improved demand for Intel Corporation (NASDAQ:INTC) based devices and combined with Haswell should provide a tailwind in 2Q13.

The firm model capex of $2.8b in 1Q13 and $13b in for 2013E. Analysts don’t expect Intel to meaningfully adjust capex for the year and although operating cash flow will improve significantly in 2H13, increased capex will limit FCF and the potential for share buybacks. However, according to the firm’s report relief should come in 2014 as investments (capex and opex) made in 2013 start generating revenue and building/shell- related capex should drop sharply y/y.

Intel Corporation (NASDAQ:INTC)’s high level of investment (capex and opex) are likely to pressure FCF and earnings in 2013, however these investment should deliver strong growth in 2014. Investments in capex will reduce Intel Corporation (NASDAQ:INTC)’s costs, help the company boost GM in 2014 and drive share gains across the general computing market. After growing sharply in 2012 and 2013 analysts expect operating expenses to moderate in 2014 as major investments in graphics, basebands, and low power roadmap are largely complete. The improved margins and lower capex will boost FCF and improve cash returns to shareholders. When combined with the removal of management uncertainty by announcing of a new CEO, these fundamental improvements should bode well for Intel Corporation (NASDAQ:INTC) shares.

The research firm reiterate Buy and $26. P/T.

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