Yesterday afternoon served as a powerful reminder that not all hardware companies are created equally.
Shares of Intel Corporation (NASDAQ:INTC) rallied after INTC posted first-quarter earnings that met expectations. Compared with Q1 2014, Intel’s operating income increased 4% to $2.6 billion and earnings per share improved 8% to 41 cents per share. Company-wide revenue remained unchanged at $12.8 billion, which just missed the $12.9 billion consensus estimate.
The top-line results were mixed across Intel’s business segments. While Intel’s PC business saw sales decline 8% over last year, its data center business and Internet of Things group posted 19% and 11% annual sales growth, respectively. Intel also reported that it returned $1.85 billion to shareholders between dividends and stock buybacks.
Looking ahead to Q2 2015, Intel expects revenues in a range of $13.15 billion to $13.25 billion, which would represent a modest decline over the $13.83 billion in sales brought in for Q2 2014. For fiscal year 2015, Intel expects revenue to remain largely unchanged from the $55.87 billion in sales from 2014, which is slightly better than the consensus estimate of $55.69 billion.
I’ve been keeping close tabs on INTC leading up to this earnings report (I recommend it in my Blue Chip Growth newsletter), and I’m pleased to see that it pulled through. However, a few other big computer parts companies are on deck to report earnings this week, and it’s not going to be pretty:
Tomorrow, SanDisk Corporation (NASDAQ:SNDK) is scheduled to report its first-quarter results after the market closes. Analysts are calling for earnings of 66 cents per share on $1.31 billion in revenue. In other words, SanDisk is expected to see earnings plunge 54% and sales fall 13% over this time last year!
To add insult to injury, the consensus earnings estimate keeps getting revised lower. Lower revisions suggest that the bottom has fallen out on SanDisk, and SNDK is going to have a difficult time living up to even these meager expectations. SNDK is a D-rated “sell.”
On Friday, Seagate Technology PLC (NASDAQ:STX) will release its first-quarter sales and earnings before the opening bell. This report will also likely be a disappointment, the consensus calling for $1.04 EPS on $3.41 billion in revenue.
Compared with Q1 2014, this translates to a 22% earnings decline and flat sales. Analysts have also been cutting their earnings expectations for Seagate: The consensus estimate has fallen from $1.27 to $1.04 per share in the past 90 days. STX is also a D-rated “sell.”
As earning season rolls along, the gulf between the “winners” and the “losers” will widen even further.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
