Once Again, Intel Impresses

10/31/2011


  Recent Price
$25
  Dividend
$0.84
  Yield
3.4%
  P/E Ratio
10
  Shares (millions)
5,340
  Long-Term Debt as % of Capital
13%
  52-Week Price Range
$24.85 - $19.16

This year, Intel ($25; INTC) has rewarded investors with a rare blend of rapid growth, a generous dividend, and impressive share-price action.

• In seven of the last eight quarters, Intel delivered at least 18% sales growth. Intel's December-quarter revenue forecast calls for 28% growth.

• Only three technology stocks in the S&P 500 Index yield more than Intel's 3.4%, and the company raised its dividend 16% in August.

• Intel shares have gained 17% so far this year, while the S&P 500 Index has retreated 3% and the index's technology sector has scratched out a 1% gain.

The acquisitions of McAfee and Infineon Technologies' ($9; IFNNY) wireless-semiconductor unit have contributed to Intel's growth spurt. But other drivers suggest Intel can keep providing investors a few of their favorite things. The stock is a Focus List Buy and a Long-Term Buy.

Pulling a rabbit from the white box

The September quarter renewed a familiar theme for Intel, as growth in emerging markets and large corporate business offset faltering demand in the North American and Western European consumer markets.

Intel said notebook shipments grew at a double-digit rate and reaffirmed expectations for an 8% to 10% rise in overall personal-computer shipments this year. Management says it gained share late in the September quarter when rival Advanced Micro Devices ($5; AMD) ran into manufacturing problems. Intel's revenue from semiconductors and motherboards used in notebook and desktop PCs (66% of sales) rose 17% in the first nine months of 2011.

Given that Intel supplies semiconductors used in 81% of the world's PCs, its robust growth seems at odds with the disappointing 3.6% gain in global PC shipments in the September quarter, reported by industry researcher IDC. But researchers struggle to find reliable data on so-called "white boxes," the generic PCs popular in emerging markets. Intel said China, India, Turkey, and Indonesia all delivered double-digit PC growth in the quarter. China has become the largest PC market in the world, while Brazil ranks third.

Sales of components destined for mobile phones, tablets, and netbooks (10% of revenue) surged 74% to $3.91 billion in the nine months ended September, reflecting the acquisition of the Infineon unit. Apple's new iPhone 4S uses fewer Intel components than earlier models. That loss of business will translate into roughly $200 million lower sales in the December quarter, Intel said.

The company benefits from the smartphone trend on a separate front: the need for more data centers to provide Internet service for those devices. Intel's data-center unit (18%) delivered 20% higher revenue in the first nine months of 2011.

Intel's growth could slow in 2012, with Wall Street projecting 4% higher per-share profits on 5% revenue growth. But shares trade at just 10 times trailing earnings, 25% below Intel's peer group and 29% below Intel's own three-year average. An annual report for Intel Corp. is available at 2200 Mission College Blvd., P.O. Box 58119, Santa Clara, CA 95054; (408) 765-8080; www.intel.com.

INTEL
Quarter
Per-Share Earnings*
($)
Sales
Change
Quarterly
Price Range
($)
P/E Ratio
Range
Sep '11
0.69
vs.
0.52
+ 29%
23.39
-
19.16
11 - 9
Jun '11
0.54
vs.
0.51
+ 22%
23.96
-
19.36
11 - 9
Mar '11
0.56
vs.
0.43
+ 25%
22.21
-
19.71
11 - 10
Dec '10
0.59
vs.
0.40
+ 8%
22.07
-
18.77
12 - 10
Year
(Dec.)
Sales
 ($Bil.)
Per-Share
Earnings*
($)
Per-Share
Dividend
($)
52-Week
Price Range
($)
P/E Ratio
Range
2010
43.62
2.05
0.63
24.37
-
17.60
12 - 9
2009
35.13
0.77
0.56
21.27
-
12.05
28 - 16
2008
37.59
0.92
0.55
26.34
-
12.06
29 - 13
2007
38.33
1.18
0.45
27.99
-
18.75
24 - 16
Quadrix Scores †
Overall
Momen-
tum
Value
Quality
Financial
Strength
Earnings
Estimates
Performance
99
76
78
91
90
72
97

   * Earnings exclude special items.
   † Quadrix scores are percentile ranks, with 100 the best.


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