What happened
Shares of semiconductor giant Intel (INTC +0.99%) reported an earnings beat Wednesday evening -- then its stock crashed Thursday morning. As of 10 a.m. ET, shares of Intel stock are down 7.2%.
Analysts had forecast Intel would earn only $0.90 per share on sales of $18.3 billion in the fourth quarter of 2021, but Intel beat those numbers with a stick. For the quarter, Intel actually earned $1.09 per share and delivered sales of $20.5 billion.
Image source: Getty Images.
So what
That sounds like pretty great news, so why is Intel stock down today? Well, as it turns out, Intel's news might have been less disastrous than Wall Street had predicted for it, but it was still pretty bad.
Although quarterly sales were better than expected, they grew only 3% year over year in the middle of the biggest semiconductor deficit in history (and all the pricing power that should imply). Gross profit margin, instead of rising in this environment, declined 320 basis points to 53.6%. And net income per share also declined under generally accepted accounting principles (GAAP) -- not quite as bad as the $1.09 pro forma number implies, perhaps, but still down 21% at $1.13 per share.
For the full year fiscal 2021, sales grew only 1% to $79 billion, gross margin slipped 40 basis points to 55.4%, and Intel ended up with $4.86 per share on the bottom line, down 2% from 2020.
Now what
Looking ahead to the first quarter of 2022, Intel is forecasting sales of approximately $18.3 billion, a 49% gross margin, and earnings per share of only $0.70 per share (or $0.80 non-GAAP). Although the revenue projection is quite a bit better than the $17.6 billion analysts have been forecasting for Intel, management's gross margin projection shows a continued deterioration in the profitability of Intel's business. Similarly, the company's projection for Q1 profit falls well short of the $0.86 per share (pro forma) that Wall Street will be looking for.
Translation: After beating on earnings in Q4 2021, Intel's probably going to miss -- and miss badly -- in Q1 2022. This, in a nutshell, is why investors are selling today.
