To absolutely no one's surprise, Intel Corp. smashed analysts' estimates in its fourth quarter Tuesday, returning a profit of $2.1bn (£1.28bn), or $1.19 a share, on record sales of $7.6bn (£4.63bn). Its shares closed off 4 3/16 to 135 9/16 ahead of the earnings report.
First Call consensus expected Intel to earn $1.07 a share, though "whisper" numbers circulating Wall Street pegged it for a profit of at least $1.15 a share. The $7.6bn in sales represents a 17 percent improvement versus the year-ago quarter when it pocketed $1.74bn (£1.06bn), or 98 cents a share, on sales of $6.5bn (£3.96bn). Company officials credited strong demand for its P6 micro architecture products for the blowout fourth-quarter sales and earnings.
"Intel achieved its 12th consecutive year of revenue growth in spite of the challenges of a turbulent market in 1998," said chief executive Craig Barrett in a prepared release. "During the fourth quarter we achieved record revenue in the Americas, Europe and Asia-Pacific."
For the year, Intel recorded sales of $26.3bn (£16.03bn), a 5 percent jump from the $25.1bn (£15.30bn) it saw in 1997. It earned $6.1bn (£3.72bn), or $3.45 a share, down slightly from the $6.9bn (£4.2bn), or $3.87 a share, it earned last year. Still, Intel managed to top the First Call estimate of $3.43 a share for the year. "It was obvious that they'd blow away the estimate," said Ken Pearlman, an analyst at CIBC Oppenheimer. "They've let us know well in advance that sales and gross margins would be higher than originally expected."
Looking ahead to the first quarter of 1999, Intel says it expects sales to be down from the record levels achieved in the fourth quarter due to seasonal factors. Also, gross profit margins in the first quarter will be slightly lower than the lofty 58 percent it enjoyed in the fourth quarter.
For the year, Intel sees gross profit margins of about 57 percent, compared to 54 percent in 1998. Still, there's good reason to believe Intel will be up to the challenge in 1999. "If you look back over the past 10 years or so, you'll see that Intel always sees a strong first quarter following even-numbered years," Pearlman said. "I suspect that the Pentium II upgrade cycle as well as all the Y2K stuff will mean good numbers in the first quarter."
Believe it or not, Intel shares were trading at a 52-week low of 65 5/8 in June.
On Monday, the stock surged to an all-time high of 141 3/8 before relenting in Tuesday trading.