With Intel (NASDAQ:INTC) announcing a major shakeup in management and trading near 52-week lows, is the blue-chip member a BUY, a WAIT and SEE, or a STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
A = A-Level Management Runs the Company?
The management picture at Intel just became one huge question mark. The world’s largest semiconductor company’s chief executive officer Paul Otellini has decided to leave in May. It was a surprising development as the company typically communicates its succession plans far in advance.
“Paul Otellini has been a very strong leader, only the fifth CEO in the company’s great 45-year history, and one who has managed the company through challenging times and market transitions,” said Andy Bryant, chairman of the board, in a press statement. “The board is grateful for his innumerable contributions to the company and his distinguished tenure as CEO over the last eight years.” Otellini, who is 62 years old, took over at the helm in 2005, and was expected to stay until Intel’s mandatory retirement age of 65. His replacement has not been named yet.
Although the board gave a kind goodbye to Otellini, shareholders are less likely to feel the same. Shares of Intel are down 17 percent year-to-date, and have dropped almost 25 percent over the past five years. On the positive, under Otellini’s tenure as CEO, Intel has made $23.5 billion in dividend payments and generated cash from operations of $107 billion.
E = Earnings Are Increasing Quarter over Quarter?
Intel has been consistently beating estimates, but earnings have been on a roller coaster ride over the past several years. In the most recent quarter, the company reported earnings of $3.0 billion (58 cents per share), or 60 cents per share on a non-GAAP basis. It beat analysts’ estimates by 10 cents per share, but it was still a decline from last year’s 69 cents per share (non-GAAP). With the exception of the third quarter, earnings for Intel have been declining quarter-over-quarter since last year.
“Our third-quarter results reflected a continuing tough economic environment,” said Otellini, in the third quarter earnings release. “The world of computing is in the midst of a period of breakthrough innovation and creativity. As we look to the fourth quarter, we’re pleased with the continued progress in Ultrabooks and phones and excited about the range of Intel-based tablets coming to market.”