Following the fiscal third-quarter (ending June 30, 2012)
earnings announcement on July 19, 2012, most of the analysts
) have remained neutral on the stock. This is primarily on the back
of a weaker chipset sales outlook for fiscal 2012 due to a
manufacturing shortage of a key 28 nanometer chipset.
Third Quarter Highlights
On a GAAP basis, quarterly net income from continuing operation
was $1,207 million or 69 cents per share, compared with $1,035
million or 61 cents in the year-ago quarter. Adjusted EPS came in
at 73 cents, falling short of the Zacks Consensus Estimate of 77
Quarterly total revenue of $4,626 million was up 28.0% year over
year, but was below the Zacks Consensus Estimate of $4,690 million.
During the third quarter, Qualcomm shipped approximately 141
million CDMA-based MSM chipsets, up 18% year over year. Gross
margin was 64.4%, compared with 64.7% in the year-ago quarter.
Quarterly operating margin was 30.0%, compared with 31.0% in the
Agreements of Analysts
Of the nine analysts covering the stock in the last 7 days, none
revised the estimate for the fourth quarter of fiscal 2012 and the
first quarter of fiscal 2013. Over the past 30 days, seven out of
nine analysts covering the stock have downgraded the estimates
while none have revised the estimates upwards for the fourth
quarter of fiscal 2012. Similarly, for the first quarter of fiscal
2013 six out of the nine analysts have reduced the estimates while
one has revised the estimate upward.
For fiscal 2012, none of the nine analysts covering the stock
have revised their estimates over the last 7 days. Likewise for
fiscal 2013, out of the nine analysts covering the stock, none has
changed the estimate for the given period.
For fiscal 2012, seven out of the nine analysts covering the
stock in the last 30 days have reduced their estimates while none
have raised their estimates. Similarly, for fiscal 2013, out of the
nine analysts covering the stock, five have reduced the estimates
while two have moved in the opposite directions.
Despite teaming up with
Taiwan Semiconductor Manufacturing Company Ltd.
United Microelectronics Corporation
), Qualcomm declared that the supply chain problem will not be
solved before the first half of 2013. We believe this is the
primary reason for the analysts to remain on the sidelines.
Currently, the Zacks Consensus Estimate for the fourth quarter
of fiscal 2012 is pegged at 70 cents. The projected annual growth
is 2.94%. For the first quarter of fiscal 2013, the Zacks Consensus
Estimate of 89 cents indicates an annualized growth of 5.10%.
Magnitude of Estimate Revisions
During the last 7 days, the current Zacks Consensus Estimates
for the fourth quarter of 2012 and the first quarter of 2013
remained in line with the previous estimates of 70 cents and 89
During the last 30 days, the current Zacks Consensus Estimate
for the fourth quarter of 2012 is 10 cents below the earlier
estimate of 80 cents. Similarly for the first quarter of fiscal
2013, the current Zacks Consensus Estimate is 7 cents below the
earlier estimate of 96 cents.
For fiscal 2012 and 2013, the current Zacks Consensus Estimates
are at par with the prior estimates of $3.18 and $3.71 in the last
7 days. However, the Zacks Consensus Estimate for fiscal 2012 is 13
cents below the earlier estimate of $3.31 in the last 30 days.
Similarly, for fiscal 2013, the current Zacks Consensus Estimates
is 10 cents below the earlier estimate of $3.81.
The company fell short of the Zacks Consensus Estimates in two
out of the four previous quarters. In the last quarter, Qualcomm's
reported earnings lagged by 4 cents or 5.19%.
No surprises are expected for the fourth quarter of fiscal 2012
and the first quarter of fiscal 2013. Moreover, EPS growth
potential for fiscal 2012 and 2013 are also at breakeven.
We believe that the gradual adaptation of 4G LTE handsets in the
developed markets of the U.S., Japan, and South Korea coupled with
the massive demand of smartphones and tablets in the emerging
economies will drive the stock upward. Moreover, the 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.
However, weaker outlook, stiff competition from its rivals like
Texas Instruments Inc.
), coupled with cheaper smartphone sales, will exert further
pressure on smartphone ASPs, thereby affecting the royalty business
of Qualcomm going forward.
We maintain our long-term Neutral recommendation on Qualcomm.
Currently, Qualcomm has a Zacks #3 Rank, implying a short-term Hold
rating on the stock.
About Earnings Estimate Scorecard
As a PhD from MIT, Len Zacks proved over 30 years ago that
earnings estimate revisions are the most powerful force impacting
stock prices. He turned this ground breaking discovery into two
of the most celebrating stock rating systems in use today. The
Zacks Rank for stock trading in a 1 to 3 month time horizon and
the Zacks Recommendation for long-term investing (6+ months).
These "Earnings Estimate Scorecard" articles help analyze the
important aspects of estimate revisions for each stock after
their quarterly earnings announcements. Learn more about earnings
estimates and our proven stock ratings at:
BROADCOM CORP-A (BRCM): Free Stock Analysis
QUALCOMM INC (QCOM): Free Stock Analysis Report
TAIWAN SEMI-ADR (TSM): Free Stock Analysis
TEXAS INSTRS (TXN): Free Stock Analysis Report
UTD MICROELECTR (UMC): Free Stock Analysis
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