Earnings Preview for Qualcomm (QCOM) 2Q 2011
April 20, 2011
Overview
Qualcomm (QCOM) is slated to report 2Q 2011 earnings after the close on Wednesday, April 20. The results are expected to come through at 4:00 p.m. EST, with a conference call slated to follow at 4:30 p.m. Sympathy Plays: NOK BRCM TXN.
Outliers & Strategy
- Key Measures:
- Non-GAAP Earnings Per Share (EPS)
- Revenues
- Adjusted EPS Guidance & Revenue Guidance (3Q 2011)
- Qualcomm is expected to earn $0.80 per share (range is $0.78 to $0.85) (Source: Yahoo! Finance). The company previously provided a range of $0.77 to $0.81.
- Revenues are estimated to come in at $3.62 bln, the higher end of the company’s range of $3.45 – $3.75 bln.
- At 24.5x trailing earnings, Qualcomm trades in-line with its 5-year average, but just 16x forward profits, resulting in a PEG ratio of 1.1, implying the company is trading in-line with its earnings growth rate.
- Over past quarters, Qualcomm has benefited from its relationship with Apple, supplying chips for the popular iPhone device.
Recent News
- 04/18: FBR Capital reiterated an Outperform rating on Qualcomm and raised the price target from $60 to $62. The firm reportedly believes current Street estimates are too low, while the shares trade at a reasonable valuation. Barron’s
- 04/15: Nomura Securities maintained a Neutral rating on Qualcomm ahead of its 2Q earnings release. The firm is looking for a strong quarter, citing increased 3G adoption, market share gains, and its relationship with Apple. Barron’s
- 04/14: Sterne Agee expects Qualcomm to earn $0.78 per share on revenue of $3.55 bln in the 2Q. The firm points out that Qualcomm has several tailwinds in the second half of the year, including iPhone 4 & 5, along with and tablet growth. Barron’s
- 04/07: Qualcomm announced a quarterly cash dividend of $0.215 per common share payable on June 24, 2011.
- 03/16: Qualcomm stated it does not see any supply disruptions stemming from the Japanese earthquake.
Technical Review
After a strong run-up from late October through February, Qualcomm shares have languished below the 50-Day SMA for over a month. The shorter candlesticks and gradual volume declines are a pair of clues suggesting a near-term breakout is in store. At current levels, equity options are pricing in about a 5% move in the share price following its earnings release (based on the April 52.50 straddle). (Chart courtesy of StockCharts.com).
Summary
Qualcomm has benefited from a string of stronger than expected earnings releases over previous quarters, as the chip supplier expands market share, thanks to expanding smartphone demand, particularly the Apple iPhone, and new product cycles. Despite this positive backdrop, however, the shares are trading about where they were going into the previous release, having declined more than 10% from the February peak amid concerns over the implications of the Japanese earthquake and potential softness in the smartphone market, as conditions around the globe point to potentially weaker economic conditions. Nonetheless, valuation remains attractive at these levels and the shares are sitting on solid technical support, implying recent concerns may be priced in.
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