Don’t write off Intel Corporation (INTC) just yet. The tech titan surprised everyone by recently reporting record first quarter results. This Zacks #1 Rank (strong buy) is cheap, trading at just 9.9x forward estimates.
Intel is the largest manufacturer of semiconductors in the world with its products used in a gamut of electronics including notebooks, PCs, desktops, servers and storage products.
Record Earnings Per Share and Revenue in Q1
On Apr 19, Intel reported its first quarter results and easily blew by the Zacks Consensus Estimate by 22%. Earnings per share were a record 56 cents compared to the consensus of 46 cents. The company made just 43 cents in the year ago period.
Revenue soared 25% to a record $12.9 billion. The company closed on two big acquisitions in the quarter, Infineon Wireless Solutions and McAfee, Inc., which contributed $496 million to revenue.
All segments saw revenue growth. PC Client Group revenue jumped 17%. Data Center Group climbed 32%.
Plenty of Cash to Reward Shareholders
Intel ended the quarter with cash and short term investments of $11.45 billion.
Intel has been using some of the cash to reward shareholders. It paid cash dividends of $994 million in quarter. Its dividend currently yields an attractive 3.3%.
It also used $4 billion to repurchase 189 million shares of common stock.
Zack Consensus Estimates Jump
What analyst wouldn’t like Q1’s results?
Following the report, 30 estimates for 2011 were revised higher, pushing the 2011 Zacks Consensus Estimate by 20 cents to $2.26 per share.
That is earnings growth of 10.5% over 2010.
28 estimates were raised for 2012 as well in the last week. The 2012 Zacks Consensus Estimate increased to $2.39 from $2.22 per share.
This is continued earnings grow of 5.7%.
You can see the big earnings growth in 2010 and that the growth is expected to slow in 2011 and 2012.
Intel Has the Magic Combination
With a forward P/E under 10 and an expected double digit growth rate, Intel has the magic combination of both value and growth.
Its PEG ratio is just 0.97, which indicates value.
The company also has a price-to-book ratio of 2.6, which is under the 3.0 I used as a cut-off for a value stock.
Additionally, Intel has a stellar 1-year return on equity (ROE) of 26%.
10-Year Chart
Shares jumped on the big earnings surprise. However, they have been trading in a narrow range since the dot-com bust over 10 years ago.
Shares have yet to re-take the 2008 high.
Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service. You can follow her at twitter.com/traceyryniec.
INTEL CORP (INTC): Free Stock Analysis Report
Zacks Investment Research
