Chipmaker Qualcomm (NASDAQ:QCOM) recently reported strong fourth quarter results. Revenue surged 18% year-over-year to $4.87 billion, easily exceeding consensus estimates. Non-GAAP earnings per share jumped 11% from last year's quarter to $0.89, several cents better than consensus expectations. To read how we derive our fair value estimate on Qualcomm, please click here.
For the fiscal year, Qualcomm's free cash flow jumped 8% to $5.2 billion, driven by revenue that grew 19% year-over-year to $19.1 billion. The company continues to be an excellent OEM-agnostic play on the growth of smartphones, as it shipped 141 million of its MSM chips during the fourth quarter. In addition to strong chip sales, the company continues to capitalize on its 3G and 4G patent profile via licensing agreements, with revenue from licensing growing 15% year-over-year during the fourth quarter and 16% for fiscal year 2012.
Going forward, demand looks incredibly strong. For calendar 2013, the company forecasts 14% 3G/4G unit growth, while it cited that industry analysts are calling for 300 million smartphone shipments during the first half of 2013 alone (up 45% on a year over year basis). As a result, the company expects revenue to increase 20%-26% year-over-year to $23 billion-$24 billion in fiscal year 2013. Non-GAAP earnings per share are expected to be in the range of $4.12-$4.32, 11%-16% higher than in fiscal year 2012. Both numbers easily eclipse consensus of $21.7 billion in sales and $4.13 per share in earnings. The company expects royalty-bearing devices of 1 billion-1.07 billion units.
In the first quarter of fiscal year 2013, the company thinks revenue growth will expand 20%-30%, with only modest performance from the new Windows RT. In our view, this should translate to terrific Apple (NASDAQ:AAPL) iPhone 5 sales, especially throughout the holiday season.
Overall, we thought the fourth quarter was fantastic, and the firm's guidance for 2013 is terrific. We expect Qualcomm to remain one of the dominant players in the smartphone space, but we believe shares are fairly valued at current levels. If worries about the fiscal cliff continue to send the broader market lower, however, the company could present us with a more compelling opportunity.
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