QUALCOMM (NASDAQ: QCOM) To Continue Strong Performance – Q1 Earnings On January 26
Monday, January 24, 2022 10:34 AM

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CDMA chip technology major Qualcomm Inc. is expected to report its first quarter FY 2011 earnings on January 26, 2011. In the last four quarters ended September 26, 2010, Qualcomm's reported EPS exceeded analysts' consensus estimates by margins in range of 3.50 percent and 15.30 percent.

Qualcomm's chip-technology is used in 3G wireless communications. 3G networks have boomed in the past five years, subscriptions growing 33% to 705 million, and this has translated to QCOM more than doubling its sales since 2004. The company operates through four segments: Qualcomm CDMA Technologies (QCT), Qualcomm Technology Licensing (QTL), Qualcomm Wireless & Internet (QWI), and Qualcomm Strategic Initiatives (QSI). QCT is a developer and supplier of CDMA-based integrated circuits and system software for wireless voice and data communications, multimedia functions and global positioning system products.

Q4 results reported record earnings per share bet analysts' estimates

For the fourth quarter of FY 2010, Qualcomm reported total revenues of $2.95 billion, representing 10 percent increase compared to revenues of $2.68 billion for fourth quarter FY 2009. Operating income for the period was $837 million, up 40 percent year-over-year basis. Net income reported for the fourth quarter was $865 million, or $0.53 per diluted share, up 8 percent and 10 percent, respectively, compared to net income of $803 million, or $0.48 per diluted share for the fourth quarter FY 2009. Free cash flow increased by 40 percent year-over-year to $4.16 billion for the fourth quarter FY 2010.

On October 20, 2010, Qualcomm sold its FLO TV 700 MHz spectrum to AT&T (NYSE: T) for $1.9 billion. The sale follows Qualcomm's previously announced plan to restructure and evaluate strategic options related to the FLO TV business operated by FLO TV Incorporated, a wholly owned subsidiary of Qualcomm. It is expected that the FLO TV business and network will be shut down in March 2011.

In the communication equipment industry, Qualcomm competes with companies like Nokia Corp. (NYSE: NOK) and Broadcom Corp. (NASDAQ: BRCM). For the trailing 12 months, Nokia has reported earnings of $0.74 per share, on revenues of $55.48 billion, with a quarterly revenue growth of 4.70 percent. Broadcom has reported earnings of $1.64 per share, on revenues of $6.01 billion, with quarterly revenue growth of 45.90 percent. On the other hand, Qualcomm has reported earnings of $1.96 per share, on revenues of $10.99 billion, with quarterly revenue growth of 9.70 percent.

Qualcomm Inc. has a P/E ratio of 26.60, higher than industry's P/E of 18.80. The P/S ratio of the company is high at 7.67, compared to the industry's P/S of 1.27. The quarterly revenue growth of the industry is 12.80 percent. The company's price earnings ratio to growth is at 1.07 years, which is very good for investors, considering industry's PEG of 1.11 years.

Qualcomm's first quarter FY 2011 business outlook

After the record fourth quarter results, the company expects the revenues in the first quarter FY 2011 in the range of $3.05 billion to $3.35 billion, representing increase in the range of 14 percent to 26 percent, compared to $2.67 billion reported for the first quarter of FY 2010. The expected diluted earnings per share for the first quarter is in the range of $0.70 to $0.74 per share, expecting increase in the range of 13 percent to 19 percent, compared to $0.62 per share reported for the first quarter of FY 2010.

Analysts' forecasts matches Qualcomm's Q1 estimates

For the first quarter ending December 31, 2010, analysts' EPS estimates range from a low of $0.70 to a high of $0.74 per share, compared to the consensus estimate of $0.72 or $0.62 earned in the year ago quarter. Analysts' revenue estimates for the first quarter range from a low of $3.06 billion to a high of $3.27 billion, compared to a consensus estimate of $3.20 billion or $2.67 billion in the same quarter a year ago. For the quarter ended December 31, 2010, the consensus EPS forecast has remained unchanged for the past 60 days, at $0.72 per share.

On March 1, 2010, the company has been authorized to repurchase up to $3.0 billion of its common stock. During fiscal 2010, 2009 and 2008, the company repurchased and retired 79,789,000, 8,920,000 and 42,616,000 shares of common stock, for $3.0 billion, $284 million and $1.7 billion, respectively. The company increased its quarterly dividend per share of common stock from $0.14 to $0.16 in 2008, from $0.16 to $0.17 in 2009, and from $0.17 to $0.19 in 2010. On January 14, 2010, the company declared quarterly cash dividend of $0.19 per common share, payable on March 25, 2022 to stockholders of record at the close of business on February 25, 2011.

In the last 52 weeks, Qualcomm Inc.'s stock has been trading in the range of $31.63 to $53.10. In the last one year, the company's stock has gained 7.72 percent to settle at $52.14 on January 19, 2011. Based on the EPS estimates and strong financial results, I set a one year target price of $55.

 

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