Earnings Preview: Qualcomm Inc. - Analyst Blog

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Qualcomm Inc. ( QCOM ) is slated to release its second quarter 2012 results on Wednesday, April 18, after the closing bell. The current Zacks Consensus Estimate for the second quarter is pegged at 86 cents per share, representing an annualized growth of 11.87%.

With respect to earnings surprises over the trailing four quarters, Qualcomm has outperformed the Zacks Consensus Estimate in three of the last four quarters. The average earnings surprise was a positive 3.67%, implying that the company has outdone the Zacks Consensus Estimate by the same magnitude over the last four quarters.

Second Quarter Highlights

On February 1, 2012, Qualcomm reported its first quarter 2012 financial results. On a GAAP basis, quarterly net income was $1,401 million or 81 cents per share compared with a net income of $1,170 million or 71 cents per share in the year-ago quarter. However, the first quarter of fiscal 2012 adjusted (excluding special items) EPS came in at 85 cents, outpacing the Zacks Consensus Estimate of 81 cents. Such outstanding performance was mainly driven by the higher demand for smartphone chipsets.

Quarterly total revenue of $4,681 million was up 40% year over year, surpassing the Zacks Consensus Estimate of $4,569 million.

Agreement of Estimate Revisions

In the last 30 days, out of the seven analysts covering the stock, three analysts increased the EPS estimate while none decreased the same for the second quarter of 2012. Similarly, for the third quarter of fiscal 2012, out of the six analysts covering the stock, three analysts raised the EPS estimate while none moved in the opposite direction.

For fiscal 2012, over the last 30 days, of the seven analysts covering the stock, three analysts raised the EPS estimate while none slashed the EPS estimate. Likewise, for fiscal 2013, in the last 30 days, out of the seven analysts, only three analysts raised the EPS estimate.

The positive sentiments of analysts stem from their optimism regarding Qualcomm's Snapdragon processor. As the roll out of LTE networks accelerate with the growing demand for high-end smartphones, the demand for Snapdragon processor also increases as these processors are integrated within these smartphones.

Magnitude of Estimate Revisions

During the last 30 days, the current Zacks Consensus Estimate was just a penny above the previous estimate of 85 cents for the second quarter of 2012 and 2 cents above the earlier estimate of 79 cents for the third quarter of 2012. Similarly, for fiscal 2012, during the last 30 days, the current Zacks Consensus Estimate was 7 cents above the earlier estimate of $3.38. Likewise, for fiscal 2013, the current Zacks Consensus Estimate was 12 cents above the earlier estimate of $3.81.

Earnings Surprises

The current Zacks Consensus Estimates for the ongoing quarter and the next quarter reflects an upside potential of 2.33% and 2.47 % (essentially a proxy for future earnings surprises), respectively. Similarly, for fiscal 2012 and 2013, the Zacks Consensus Estimates contain growth potentials of 2.61% and 4.84%, respectively.

Our Recommendation

We believe thatthe company's record-high earnings,strong balance sheet and solid management outlook for the current fiscal year will act as positive catalysts in the long run. Moreover, the growing popularity of smartphones and tablets coupled with increased deployment of 3G/4G networks will further drive the stock upward.

However, stiff competition from formidable rivals like Broadcom Corporation ( BRCM ) and Texas Instruments Inc. ( TXN ) as well as lower ASP of smartphones will negatively impact Qualcomm's royalty business going forward.

We maintain our long-term Outperform recommendation on Qualcomm. Currently, Qualcommhas a Zacks #2 Rank, implying a short-term Buy rating on the stock.

 

 


 
BROADCOM CORP-A ( BRCM ): Free Stock Analysis Report
 
QUALCOMM INC ( QCOM ): Free Stock Analysis Report
 
TEXAS INSTRS ( TXN ): Free Stock Analysis Report
 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: BRCM , QCOM , TXN

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