Intel: Second Quarter And Second Half 2013

| About: Intel Corporation (INTC)

Earnings season will get rolling this week. So what can we expect from Intel (NASDAQ:INTC) on July 17th?

This will be the first earnings presentation with new co-leaders, CEO Brian Krzanich and President Renee James. That alone should hold investors' interest.

We have been told by Intel management, in different forums, to expect a so-so first half of 2013, with a return to growth in the second half. At the end of 2012, we were told to expect "low single digit growth for the whole of 2013." We can assume that "low single digits" might be 3%. Since 2012 closed at $53.34 billion, 2013 should be $55 billion, which would be $1.7 billion in new business (think of it as an Altera (NASDAQ:ALTR) created in a single year), and a new record for Intel sales. Full year gross margin was expected to be 60%

So far, the first quarter gave us $12.6 billion and $.40 per share. At the earnings conference call (linked above), the forecast for the second quarter was for sales of $12.9 billion. Not $12.9 billion, plus or minus $500 million as has been the case in previous guidance forecasts. Intel CFO Stacy Smith also left out forecasts for R&D and SG&A that had been included previously. He did forecast a 2% recovery in gross margin to 58%.

There is no reason to expect anything but R&D and SG&A numbers for the second quarter that are close to those of the first quarter.

So the first two quarters should look like:

Q1 Q2
Sales 12,580 12,900
Gross Profit 7,066 7,482
R&D 2,527 2,527
SG&A 1,947 1,996
Other 73 73
Op Income 2,519 2,886
Tax 398 577
Net Income 2,019 2,309
EPS $.40 $.46
Click to enlarge

Note that the "Street Estimate" is $.39 per share earnings for the second quarter.

Tradition is that new management gets a "bye" on their first quarter in the form of at least a small beat over Street expectations.

If the "low single digit" sales growth guidance and 60% full year gross margin is still intact, the second half will have to be $29.58 billion sales and $18.452 billion gross profit. Let's assume that the third and fourth quarter sales are split 48% and 52% and gross profit is split by the same percentages. I will take the liberty of holding R&D flat and SG&A as a percentage of sales. Assume taxes at 20% as in the first quarter.

That would make the third and fourth quarters look like this:

Sales 14,198 15,381
Gross Profit 8,857 9,595
R&D 2,527 2,527
SG&A 2,197 2,380
Other 73 73
Op Income 4,060 4,615
Tax 812 923
Net Income 3,248 3,692
EPS $.65 $.74
Click to enlarge

Note that the Street Estimate is $.50 per share earnings for the third quarter.

Unless there is a disappointing reassessment of Intel's second half 2013 prospects, the company will do about $4 billion more business in the second half than in the first half, establishing an ending annual sales run rate of $61 billion for FY 2014. That amounts to about $8 billion in new business when compared to 2012. The $8 billion growth is equivalent to the total sales of Nvidia (NASDAQ:NVDA) and nearly the total sales of AMD (NYSE:AMD). The $8 billion in Intel sales growth represents over half of the total semiconductor sales of Qualcomm (NASDAQ:QCOM).

Makes an investor wonder what Intel has in the bag that Digitimes doesn't know about.

Disclosure: I am long INTC. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.