A trio of uninspiring earnings reports from technology stalwarts Intel Corporation (NASDAQ:INTC), International Business Machines Corp. (NYSE:IBM), and eBay Inc (NASDAQ:EBAY) may have investors questioning the technology sector as a whole.
It’s been a notoriously poor period for technology companies over the past few months, and recent earnings reports from these three technology titans continued the disturbing trend of missing analyst expectations. However, each of these companies remains a leader in the technology landscape, and despite the disappointing numbers, here’s why selling now would be a mistake.
Troubling times in technology
Intel Corporation (NASDAQ:INTC) posted $12.8 billion in second-quarter revenue and $2 billion in net income, but both metrics missed Wall Street expectations. Management is enthusiastic about the company’s Atom and Core processors, and Chief Executive Officer Brian Krzanich said his top priority is continued penetration of Intel chips in the booming mobile market. Unfortunately, this did not stop shares from slumping in after-hours trading.
International Business Machines Corp. (NYSE:IBM), meanwhile, posted second-quarter earnings that fell 17% year over year on lower revenue and higher costs related to layoffs, but shares climbed in after-hours trading since the results weren’t as bad as Wall Street had feared.
Still, earnings per share clocked in at $2.91, 13% lower than last year’s second quarter, which can’t sit well with investors.
eBay Inc (NASDAQ:EBAY)’s second-quarter net income jumped nearly 13% on a non-GAAP basis, and revenue climbed 14% year over year. Both figures met analyst expectations, with pronounced strength coming from the company’s highly successful PayPal unit.
PayPal remains one of the company’s most highly lucrative assets, and it held up that reputation in the second quarter. Revenue at PayPal increased 20% year over year and the service racked up 17% additional active accounts in the quarter.
Unfortunately the company’s third-quarter guidance left a lot to be desired, and the stock sold off in the after-hours trading. eBay Inc (NASDAQ:EBAY) expects current quarter revenue to be between $3.85 per share and $3.95 per share and EPS of at least $0.61 per share. Both figures missed analyst expectations.
Compelling shareholder returns for the taking
As the markets have sold off these stocks, new investors are getting better and better entry prices. The steep decline in Intel Corporation (NASDAQ:INTC) and International Business Machines Corp. (NYSE:IBM) over the past several weeks has sent their dividend yields significantly higher.
And, it’s not as if Intel’s and IBM’ dividends are standing still. Each company has demonstrated a commitment to raising their shareholder payouts on a regular basis. For instance, Intel Corporation (NASDAQ:INTC) has increased its dividend 4 times since the beginning of 2010, and will likely do so again when the company declares its next quarterly payout in the next few weeks.
Even at its current level, Intel’s dividend approaches 4% and is one of the highest available in the technology space.
Moreover, Intel Corporation (NASDAQ:INTC) is actively buying back its own shares. The company used $550 million to repurchase approximately 23 million shares of its own stock in the second quarter.