The Business Press Maven often must delve deep into financial reports to uncover the ways in which the business media's portrayals of a company's earnings results fail to match reality. With Intel's (INTC) - Get Report report Tuesday evening, however, all I had to do was peek at the press release.
The chipmaker's second quarter was described in headlines as a knockout success, well above expectations and proof that there is life in the economy, suggesting immunity to the bad times in the entire computer industry. Now I'm nor saying that Intel did poorly -- far from it. But surpassing expectations in anything that matters or carries forward? Anyone who even glanced at the press release would know it wasn't so.
They Just Don't Get Intel!
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That didn't stop the
, which was apparently so excited about Intel's beating expectations that they could not stop repeating that fact.
First, the headline mentions it:
"Intel 2Q profit jumps 25 percent, beats estimates"
As does the sub-headline:
"Intel 2Q profit jumps 25 percent on demand for laptop chips, beats Wall Street estimates"
And, finally, the lead, also repeats it:
"Intel Corp.'s second-quarter profit jumped 25 percent as blossoming sales of laptop chips helped the company cruise past Wall Street's estimates Tuesday."
Though slightly less repetitive,
thought the beat so compelling that it suggested the results could carry the entire market on its back the next day.
"Intel Beat Could Give Wednesday A Lift"
offered a similar take, even remarking that Intel might be making the case that PCs are immune to the economic cycle.
Here's its headline:
"Intel results ease market fears about economy
Commentary: Intel's outlook downright bullish. Are PCs recession proof?"
headline informs us that Intel blew past earnings expectations "again" and the article leads this way: "This was a big quarter for Intel, no matter how you slice it." Soon after that, the column reads: "Intel beat handily on the topline, and surged past expectations on the bottomline: 28 cents instead of the 25 cents Wall Street expected." Yes, handily and no matter how you slice it ... unless, of course, you read the press release.
On a separate note of incorrectness, by the way,
told us that gross margins "also looked good," which was "all more than respectable, when you consider all the worries floating around about a global PC industry slowdown." Actually, while gross margins were up in absolute terms from last quarter, they were slightly disappointing when held up to expectations, coming in toward the lower end.
, in an article titled "Intel Net Rises With Global Laptop Sales," mentioned Intel's 25% jump in second-quarter profit and positive forward guidance without touching on how the company did in the second quarter vs. expectations? The paper knew enough to avoid a trap.
Still, even the
wasn't specific enough.
Back to the Press Release
And all you had to do to be specific is to read Intel's
without falling asleep. Look at the fourth and fifth bullet points. With all the breathless talk about Intel's core business soaring past expectations, guess what? There are two non-core business, non-repeating beats of expectations that added up to somewhere around 3 cents a share, which would account for the size of the "beat."
- "Restructuring and asset impairment charges of $96 million were lower than the previous expectation of approximately $250 million.
- The effective tax rate for the quarter was 31 percent, lower than the previous expectation of approximately 33 percent due to a tax settlement."
Again, this is not to say that Intel's report and talk about the future was weak. But the savvy investor should not be fooled by misplaced breathlessness. In everything that matters, the quarter's earnings were no better than expected. And margins were a little worse.
I don't often highlight work by
, if only to avoid the appearance of favorable treatment, but its take on Intel's quarter is worth a look. Look at the third sentence of this article by Alexei Oreskovic:
"But some of the report's small print about Intel's business, including the quality of Intel's EPS..."
Soon he is off talking about what was hiding right there in plain sight in the press release, which way too many others missed or ignored.
At the time of publication, Fuchs had no positions in any of the stocks mentioned in this column.
Marek Fuchs was a stockbroker for Shearson Lehman Brothers and a money manager before becoming a journalist who wrote The New York Times' "County Lines" column for six years. He also did back-up beat coverage of The New York Knicks for the paper's Sports section for two seasons and covered other professional and collegiate sports. He has contributed frequently to many of the Times' other sections, including National, Metro, Escapes, Style, Real Estate, Arts & Leisure, Travel, Money & Business, Circuits and the Op-Ed Page. For his "Business Press Maven? column on how business and finance are covered by the media, Fuchs was named best business journalist critic in the nation by the Talking Biz website at The University of North Carolina School of Journalism and Mass Communication. Fuchs is a frequent speaker on the business media, in venues ranging from National Public Radio to the annual conference of the Society of American Business Editors and Writers. Fuchs appreciates your feedback;
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