{"id":687,"date":"2010-07-12T21:15:49","date_gmt":"2010-07-13T01:15:49","guid":{"rendered":"http:\/\/www.credittrends.com\/blog\/?p=687"},"modified":"2010-07-13T06:24:18","modified_gmt":"2010-07-13T10:24:18","slug":"intel-reporting-after-the-u-s-close","status":"publish","type":"post","link":"https:\/\/www.credittrends.com\/blog\/2010\/07\/12\/intel-reporting-after-the-u-s-close\/","title":{"rendered":"Intel-Reporting After the U.S. Close"},"content":{"rendered":"

(updated July 13 6:21 a.m. est)<\/p>\n

Intel Corporation (INTC) will release its financial results after the US financial markets close.<\/p>\n

We spotlight INTC due to its consistent ability to produce free cash flows and strong credit, both of which manifest in a below-market cost of equity capital. INTC is, by Credit Trends, rated \u201cA\u201d for both cash flow and debt, as seen below.<\/p>\n

\"\"

While the model has picked up some deterioration of its credit quality over the past year (operating cash flow adjusted for working capital changes, leases, total debt, ratio of working capital to total debt, pensions, inventory\/sales, reinvestment, taxes, others), INTC remains a very strong credit, and is thus accorded our highest rated class.<\/p>\n

The table below shows INTC could free up additional free cash flows by reducing its selling, general and administrative expense more in line with its rate of growth. Interestingly, INTC has done this with its R&D even though R&D as a percentage of both sales and cost of sales has declined. This was due to the absolute expense reduction in nominal dollars during its past fiscal year of approximately $100MM. This was quite close to the $91 MM we calculated as corporate \u201cfat\u201d we called for a year ago.<\/p>\n

INTC is a low tax rate payer by any measure, but in a higher rate (on a cash basis) and more importantly, a more consistent rate than AMD or TXN.\u00a0 In \u201cSecurity Valuation and Risk Analysis<\/a><\/strong>\u201d we show how taxes should be analyzed for areas of weakness and strength, including its role as a leading indicator. In its last fiscal year, INTC was in a 16.5% cash rate versus the 23.4% rate reported to shareholders. By contrast, AMD was in a 3.4% cash rate and TXN a 16.4% rate. Over the past 6 years INTC\u2019s cash tax rate has averaged 6 percentage points higher than TXN.<\/p>\n

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As for fair value, given its estimated 7% rise in long-term free cash flows and low cost of capital, INTC is currently about 13% undervalued.<\/p>\n

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Date Source: Research Insights, CT Capital LLC<\/p>\n

Kenneth S. Hackel
\nPresident
\nCT Capital LLC<\/p>\n

www.credittrends.com<\/a><\/p>\n

INTC has risk and should not wish to be considered by certain investors-consult your investment professional.<\/p>\n

Investors and potential investors should not rely on any information contained herein or communicated by any means to replace consultations with qualified investment professionals to meet their individual investment needs.\u00a0 The materials contained herein are for general purposes only.\u00a0 They do not have regard to the specific investment objectives, financial situation or risk tolerance of individual or corporate investors.\u00a0 Investors should consult with a financial professional prior to making any investment decision or investing in any of the firm\u2019s products.\u00a0 CT Capital LLC, its employees, or any associated individual, is not responsible for any investment decisions the recipient of these materials may make with respect to any investment.\u00a0 Data contained herein is gathered from sources believed to be correct and reliable but assume no liability for the accuracy or validity of any material whether written or verbally communicated.\u00a0 Nothing in this presentation should be construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any security or investment by CT Capital LLC, its directors, officers, principals, employees, agent, affiliates, or any third party.<\/p>\n

No employees or clients of CT Capital LLC \u00a0or credittrends<\/a> own a position in INTC, nor was CT Capital or credittrends paid for preparing this report.<\/strong><\/p>\n

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(updated July 13 6:21 a.m. est) Intel Corporation (INTC) will release its financial results after the US financial markets close. We spotlight INTC due to its consistent ability to produce free cash flows and strong credit, both of which manifest in a below-market cost of equity capital. INTC is, by Credit Trends, rated \u201cA\u201d for […]<\/p>\n

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