Add Intel to the Growing List of Earnings Warnings

Are global headwinds building? Just ask DuPont and Toyota

   
Add Intel to the Growing List of Earnings Warnings

Over the past few days, we’ve seen a variety of major companies come out with weak outlooks for the fourth quarter. The latest came today from Intel (NASDAQ:INTC). The giant chipmaker projects fourth-quarter revenues of $13.7 billion, give or take $300 million. Its prior estimate was for $14.7 billion, within a range of $500 million. This was enough to take Intel’s stock down by more than 4% to $23.90 in Monday morning trading.

Intel did provide a reasonable excuse: that is, the supply disruptions from the massive flooding in Thailand, which has destroyed key manufacturing facilities for hard drives.

Yet, global macroeconomic sluggishness is likely to be a key factor as well. Keep in mind that other chipmakers, like Texas Instruments (NYSE:TXN) and Altera (NASDAQ:ALTR), also provided weaker guidance because of fall-offs in demand. Even hot sellers like the Apple’s (NASDAQ:AAPL) iPhone aren’t enough to improve things overall.

In fact, the problems seem to be fairly widespread beyond technology. For example, automaking giant Toyota (NYSE:TM) cut its fiscal year 2011 profit forecast by over half to 180 billion yen ($2.3 billion). Toyota sales are expected to slide to 18.2 trillion yen ($234 billion), down from 19 trillion yen ($244.5 billion).

Interestingly enough, the Japanese company placed lots of blame on the situation in Thailand as well as the surging yen, which makes all those Camrys and Corollas that Toyota sells outside of Japan more expensive. But again, could this really just be a way to deflect attention away from the economic problems across the world?

Then there’s DuPont (NYSE:DD), which reduced its 2011 earnings-per-share guidance by 10 cents to a range if $3.87 to $3.95. The main reason was a destocking within its industrial and polymer supply chains. Keep in mind that these supplies are involved in economically sensitive areas like autos and electronics.

All these negative earnings announcements shouldn’t really be a surprise. Let’s face it, the problems in Europe are real. To deal with the sovereign debt issues, the EU is on a path of austerity, which will certainly be a drag on demand. And Europe isn’t alone. The U.S. also has been retrenching to deal with the bulging deficits, and now-mandated spending cuts won’t do anything to help the domestic economy.

Consider that according to a report in Reuters, fourth-quarter earnings for the S&P 500 are now expected to grow by 10.1%, which is off from the previous estimate of 15% in October and 17.6% in July. That means, investors need to be wary. If the deterioration continues, many top multinational companies could be vulnerable to price declines. Keep an eye out for further fourth-quarter warnings from companies that are tied to the global economy.

Tom Taulli runs the InvestorPlace blog “IPOPlaybook,” a site dedicated to the hottest news and rumors about initial public offerings. He is also the author of “All About Short Selling” and “All About Commodities.” Follow him on Twitter at @ttaulli. As of this writing, he did not own a position in any of the aforementioned stocks.


Article printed from InvestorPlace Media, http://investorplace.com/2011/12/intel-earnings-warning-toyota-dupont/.

©2014 InvestorPlace Media, LLC

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