7.2.14: How Important was Intel’s Upside Surprise ?

We’ve occasionally posted this spreadsheet to the blog: it shows upward and downward revisions for all of the publicly-traded companies where estimates are tracked by ThomsonReuters:

FC-eps estimate revisions

Note how upward revisions exceed downward revisions typically during the heaviest earnings reporting periods each quarter, and then as the earnings report volume eases, the pessimism takes over, and the analyst revisions that are negative consistently exceed the positive revisions.

Until the Intel pre-announcement on June 12th, the pattern of revisions were continuing about normal, and then note how that positive revisions week of June 13th sticks out like a sore thumb.

The Intel pre-announcement resulted in the first 50% positive revisions for a non-reporting period, since late August, 2013.

According to the ThomsonReuters data, here is the expected year-over-year q2’14 growth rate for Technology sector earnings and its progression through the month of June ’14:

Week of June 27: Tech +12.4%

Week of June 20: Tech +12.1%

Week of June 13: Tech +11.8%

Week of June 6: Tech +11.6%

Week of May 30: Tech +11.5%

This could be one of the reasons that the SP 500 hasn’t seen the estimate erosion as the 2nd quarter ’14 has evolved. Both Apple’s q1 ’14 and now Intel’s pre-announcement, bode well for q2 ’14 Tech earnings.

Per Bespoke, the Tech sector is trading at roughly 18(x) – 19(x) earnings, with 12% sector growth expected. 91% of the sector is trading above it’s respective 50-day moving average.

The point of this post is that Intel still matters. The semi’s have been on fire all year.

Technology as a sector is now overbought, but what isn’t in this market ?

Be careful out there.

Long (INTC, MU, overweight Tech)

Trinity Asset Management, Inc. by:

Brian Gilmartin, CFA

Portfolio manager


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