Qualcomm’s (QCOM) Upbeat Outlook Makes Stock Attractive, Q1 EPS Tops Estimates
By:NewsyStocks   Wednesday, February 01, 2022 5:56 PM

Qualcomm (QCOM), digital telecommunications products manufacturer, provided outlook for the second quarter and increased its fiscal year 2012 earnings forecast to be driven by robust demand for its products. The company's first quarter earnings results came in above analysts' expectations.

The company has also lifted its MSM shipments from the earlier level indicating its confidence of taking up opportunities from 3G/4G device makers more vigorously. Qualcomm had also indicated that it would continue its efforts for more investments in innovative wireless technologies, services and products. The company will be exploring more opportunities thrown by 4G expansions in developed nations and the implementation of 3G in emerging nations.

Q1 Results

Qualcomm reported net income that grew 20 percent to $1.4 billion from $1.17 billion and earnings rose 14.1 percent to 81 cents a share from 71 cents a share in the year earlier quarter. On an adjusted basis, the company would have earned $1.67 billion or 97 cents a share in the latest quarter indicating a growth of 24 percent.

Total revenues jumped 40 percent to $4.69 billion from $3.35 billion in the previous year quarter. Of this, equipment and services revenues accounted for $3.17 billion, 43 percent higher than $2.21 billion in the year-ago quarter. Licensing revenues also grew 33.4 percent to $1.51 billion from $1.14 billion.

Wall Street analysts' had predicted the company to deliver earnings of 90 cents a share on revenues of $4.58 billion.

Gross margins continued its slippery trend. Qualcomm's gross margin for the quarter slipped further to 62.53 percent from 63.64 percent in the fourth quarter and from 68.85 percent in the first quarter of fiscal 2011. However, operating margin improved to 33.13 percent from 29.44 per in the fourth quarter, but slipped from 37.28 percent in the year-ago first quarter.

Importantly, the company's MSM shipments increased 32 percent yea-on-year to 156 million units and increased 23 percent sequentially too.


Moving ahead, Qualcomm is projecting adjusted earnings of 91 – 97 cents a share on revenues of $4.6 - $5.0 billion for the second quarter. The company is projecting its financial targets based on 24 percent – 31 percent growth in MSM shipments of about 146 – 154 million for the second quarter. The earnings and revenue outlook are far ahead of Street analysts' estimation of 89 cents a share on revenues of $4.51 billion.

For the fiscal 2012, the company increased adjusted earnings guidance to $3.55 - $3.75 a share from $3.42 - $3.62 a share and GAAP earnings to $3.36 - $3.56 a share from $2.80 - $3.00 a share projected earlier. Qualcomm is also expecting slightly higher average selling price of about $204 - $216 compared to its earlier outlook of about $197 - $209. The shipment is lifted to 875 – 945 million units from 865 – 935 million units. Revenues guidance has also been lifted to $18.7 - $19.7 billion from $18.0 - $19.0 billion. Analysts' have consensus earnings projections of $3.59 a share on revenues of $18.48 billion.

Our Take

The company seems to be well poised to take advantage of the demand in 4G and 3G markets. The concern is of weakening gross margin, which should be improved. Operating margin did show improvements sequentially due to higher revenues. None-the-less, the outlook and industry demand offer scope for the stock to appreciate.