Will Intel Underperform in the First Quarter?

With shares of Intel Corporation (NASDAQ:INTC) trading around $21.25, is INTC an OUTPERFORM, a WAIT AND SEE, or a STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalysts for the Stock’s Movement are Negative

Intel reported its fourth-quarter and full-year 2012 results on January 17 after the bell, and like any highly-anticipated earnings report it generated a frenzy of trading activity. The stock spiked up to close 2.58 percent higher immediately before the markets closed, but has slid 6.31 percent this morning after the report was digested by investors.

Year over year, the company reported a 3 percent drop in fourth-quarter revenue to $13.5 billion, a 31 percent drop in operating income to $3.2 billion, a 27 percent drop in net income to $2.5 billion, and a 25 percent drop in earnings per share to $0.48. Intel’s operating margin also fell 6.5 points to 58 percent for the quarter.

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But all this isn’t really what pulled the stock down so much in the after market. The results actually came in ahead of analyst forecasts for earnings of $0.45 per share and $13.53 billion in revenue. The killer was Intel’s weak 2013 outlook.

Here’s what the company is expecting for the first quarter of 2013:

• Revenue: $12.7 billion, plus or minus $500 million (a drop from $12.9 billion in the year-ago period).
• Gross margin percentage: 58 percent, plus or minus a couple percentage points.
• R&D plus MG&A spending: approximately $4.6 billion.
• Amortization of acquisition-related intangibles: approximately $75 million.
• Impact of equity investments and interest and other: net loss of approximately $50 million.
• Depreciation: approximately $1.7 billion.