Earnings Preview: Qualcomm Inc. - Analyst Blog
April 19 2011 - 7:30AM
Zacks
Qualcomm
Inc.(QCOM) is slated to release its second quarter 2011
results on Wednesday, April 20, after the closing bell. The current
Zacks Consensus Estimate for the second quarter is pegged at 72
cents, representing an annualized growth of 36.60%.
With respect to earnings surprises
over the trailing four quarters, Qualcomm has outperformed the
Zacks Consensus Estimate in all the four quarters. The average
earnings surprise was a positive 7.00%, implying that the company
has outdone the Zacks Consensus Estimate by the same magnitude over
the last four quarters.
First Quarter
Performance
On January 26, 2011, Qualcomm
reported its first quarter 2011 financial results. Quarterly net
income on a GAAP basis was $1,170 million or 71 cents per share
compared with a net income of $841 million or 50 cents per share in
the year-ago quarter. Adjusted earnings per share (EPS) of 69 cents
surpassed the Zacks Consensus Estimate of 63 cents.
Total revenue was $3,348 million,
up 25% year over year. Total revenue also beat the Zacks Consensus
Estimate of $3,198 million. The growth in revenue was primarily
driven by increased demand for smartphones and data-centric
devices.
Agreement of Estimate
Revisions
In the last 30 days, out of the 10
analysts covering the stock, 1 analyst increased its EPS estimates
for the second quarter of 2011 while none reduced their estimates.
Similarly, for the third quarter of fiscal 2011, out of the 9
analysts covering the stock, 1 analyst increased its EPS estimate
but none decreased it.
For fiscal 2011, in the last 30
days, out of the 12 analysts covering the stock, 1 analyst
increased its EPS estimates and 1 analyst decreased its estimates.
Likewise, for fiscal 2012, out of the 12 analysts covering the
stock, 2 analysts increased their EPS estimates while 1 slashed its
EPS estimates.
Most of the analysts remained
neutral on Qualcomm’s stock as we believe that most of the
positives are already reflected in the current valuation leaving
little room for above market gain. Furthermore, the company is
currently trading higher at the 52-week price trend.
Magnitude of Estimate
Revisions
During the last 30 days, the Zacks
Consensus Estimate was in line with the current estimates of 72
cents for the second quarter of 2011 and 61 cents for the third
quarter of 2011. Similarly, for fiscal 2011, the Zacks Consensus
Estimate was in line with the current estimates of $2.70. However,
for fiscal 2012, the Zacks Consensus Estimate jumped 3 cents from
$2.96 to $2.99.
Earning
Surprises
In the previous quarter, Qualcomm
reported EPS of 69 cents, which beat the Zacks Consensus Estimate
by 6 cents. The current Zacks Consensus Estimates for the ongoing
quarter contains a 4.17% upside potential while for the upcoming
quarter, it is also reflecting a 1.64% upside potential
(essentially a proxy for future earning surprises). Similarly, for
fiscal 2011 and 2012, the Zacks Consensus Estimate upside potential
is 1.11% and 2.68%, respectively.
Our
Recommendation
We believe 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. Moreover, the gaining popularity of smartphones
and tablets will further drive the stock upward.
However, stiff competition from
formidable rivals like Broadcom Corporation (BRCM)
and Texas Instruments Inc. (TXN) as well as from
low-cost competitors like Mediatek of Taiwan and VIA Technologies
of China will act as headwinds 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.
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