Intel Reports Record Q1 Earnings, Nudges Futures Higher After-Hours

Tech bellwether Intel Corp. (INTC) reported better-than-expected earnings Tuesday after the bell and shares are responding to the good news during the after-hours session.  The leading chip manufacturer reported Q1 EPS of $0.43/share vs. $0.11/share for the same quarter last year on revenue of $10.3 billion, up 44% year-over-year.

Consensus estimates called for EPS of $0.38/share on revenue of $9.83 billion.  Gross margins, which are a focal point of any INTC report, came in at 63%, ahead of 61.3% consensus estimates.  It was the strongest Q1 in the company’s history.

Guidance came in strong as well, with forecasts calling for Q2 revenue of $9.8 billion – $10.6 billion vs. estimates of $9.7 billion and Q2 gross margins of 62%-66% vs. estimates of 60.4%.  FY 2010 gross margins were forecasted to come in at 61%-67%, representing a raise of previous guidance and beating estimates of 61.6%.  It was a great overall Q, as the company beat on essentially every important metric.

PC chip sales came in particularly strong, which was a big surprise considering such sales are typically weak in Q1 following the holidays.  CEO Paul Otellini noted that these numbers were supported by especially strong numbers for high-end PC demand and improving demand from corporate customers.  Given the age of current corporate PC’s, “you’re going to get to the point as CIO’s are feeling better about their business, that it makes economic sense to swap these out,” said Ortellini.  The company also saw benefits from its aggressive management of costs, capacity and competitive positioning.

Share closed up 1% during regular trading before adding another 4% following the report, finishing the after-hours session at $23.67.  These were great numbers from a great company, but I wouldn’t recommend getting long here.  After last Q, also a beat, shares rallied initially before selling off.  I wouldn’t be surprised if this happened again here.  The day after the last Q was reported is denoted by the circle on the chart below.  As you can see, even though shares were up big that day, they did not hold their new levels, or at least not before a brief sell-off.

If you’re looking to go long INTC, I would wait for a pullback, aiming to open up a position at $22 or lower.  If you’re looking for a trade, I would look elsewhere in the chip space, perhaps Marvell (MRVL) or Texas Instrument (TXN), if not outside the space entirely.  INTC is likely a harbinger for good news throughout the tech sector, so the wise move here may be to go long a strong company that has not yet reported/been affected by a company in its space.

Disclosure: No holding ins INTC, MRVL, TXN.