Intel (INTC – Free Intel Stock Report), a market leader in the semiconductor segment and a bellwether for the broader sector, has reported good news for the second quarter of 2014 (results are to be released on July 15th). More specifically, management now looks for second-quarter revenues to be $13.7 billion, plus or minus $300 million, which is a significant upgrade from its prior $13 billion expectation. What's the reason for the optimism? The primary factor was increased business demand for personal computers, as many corporations have boosted IT spending in response to increased profits. Overall, this is very good news, as it has been quite some time since the chip giant has preannounced that results will exceed expectations. Consequently, investors bid the stock nicely higher.
As a result of the recent announcement, we are increasingly bullish in our expectations for both the second quarter and full year. We now look for revenues of $13.7 billion and share net of $0.44 in the June interim, which compares favorably with our previous estimates of $12.95 billion and $0.39, respectively. The gross margin guidance has also been bumped up by a percentage point, to about 64%, reflecting the higher revenue base.
Moreover, we have raised our view for the full year. We now look for earnings per share of $2.00, up $0.10 from our earlier call. Revenues are likely to come in at $54.1 billion, a sizable increase from our prior $53.1 billion expectation. Given the current higher revenue and earnings base, we have boosted our top- and bottom-line expectations for next year as well, to $55.2 billion and $2.10 per share, respectively. We believe that increased revenues will drive the gross margin higher over the next 12 to 18 months, as growing R&D and SG&A expenses are better absorbed.
Intel stock remains a solid selection for those seeking a relatively stable technology holding. A good divided yield helps to sweeten the pot. The company remains the leader in the personal computer market, and we don't look for it to relinquish that position, given its immense size and solid financial ledger. Intel's foray into the lucrative communications segment could provide sizable upside long term, though risks remain regarding this endeavor.
At the time of this article’s writing, the author did not have positions in any companies mentioned.