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Intel: Cash Flow Statement Analysis

|Includes: AMD, Intel Corporation (INTC)

Intel corporation has seen cash flow from operations increase over the last five quarters. Intel has generated sufficient cash flow from operations to fund financing and investing activities. Net cash flow from operations was higher than net income and indicates high quality earnings.  

Cash flow from operations is a major source of cash for Intel. Funds from operations September 30, 2010 was $4.2 billion or 38 per cent of net revenue and one year later grew to $5.7 billion or roughly 40 per cent of net revenue, an increase of $1.5 billion or 2 per cent of net revenue.  Funds from operations increased by 35.7 per cent ($4.2 to $5.7 billion). 

Most of Intel's cash is spent on investing and financing activities. Combined the expenses account for roughly 30 to 50 per cent of net revenue in the quarters from the quarter ending September 30, 2010 to the quarter ending September 30, 2011. Dividends and share repurchases account for the uses of cash within financing activities and within investing activities capital expenditure and purchase/sale of investments account for the use of cash. 

Net operating cash flow was higher than net income in every quarter. The relationship between net income and operating cash flow is an indicator of earnings quality. For a mature company it is desirable that operating cash flow exceeds net income. Between the quarter ending September 2010 and the quarter ending September 2011 the spread between net income as a percentage of net revenue and net operating cash flow as a percentage of net revenue increased from roughly 600 basis points to over 2000 basis points.

Net operating cash flow covered capital expenditure in every quarter between the quarter ending September 2010 and the quarter ending September 2011. Intel can easily fund capital expenditure from cash flow from operations. The spread between net operating cash flow as a percentage of net revenue and capital expenditure as a percentage of net revenue was between roughly 1000 and 2000 basis points during the last five quarters.

Bullish Factors
Cash flow from operations increased in every quarter and was positive.  Cash flow from operations covered cash outflows for investing including capital expenditure and covered cash outflows to investors. Cash flow from operations was higher than net income. 

Bearish Factors
Cash flow from operations increased at a rate of change (35.7 per cent) above Intel's sustainable growth rate of 17.31 per cent.    


Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.