By: Todd McDonald, Analyst
Qualcomm (NASDAQ:QCOM) is slated to report 3Q 2013 earnings after the close on Wednesday, July 24. 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.
Outliers & Strategy
- Non-GAAP Earnings Per Share (EPS): For the 3Q 2013 period, Qualcomm previously indicated it expects Non-GAAP EPS of $0.97 to $1.05. Guidance tends to be conservative and actual results tend to come in at the high end of forecasts. The current consensus is toward the high end of this range at $1.03.
- Revenues: Qualcomm said in April it expects 3Q revenue of $5.8 bln to $6.3 bln. The current estimate is $6.05 bln.
- Adjusted EPS Guidance & Revenue Guidance (4Q 2013): Guidance for the next quarter will be watched closely, given results for the 3Q 2013 are largely priced into the shares. The estimates are for Adjusted EPS of $1.08 on revenue of $6.31 bln. (Source: Yahoo! Finance)
- At just 12.54 forward earnings, Qualcomm is trading at a discount to historical multiples.
- Sympathy Plays: Nokia (NYSE:NOK), BroadCom (BRCM), and Texas Instruments (NYSE:TXN).
- Over the past several quarters, Qualcomm has benefited from its relationship with Apple (NASDAQ:AAPL), supplying chips for the popular iPhone device. In addition, the majority of Android devices run on Qualcomm chipsets.
- Implied Volatility: Over the past 8 quarters, Qualcomm shares have averaged an absolute move of approximately 4.34% after earnings are released. The options market is pricing in a less volatile move, at about 3.8%.
- 7/17: Qualcomm declared a quarterly dividend of $0.35 per share, increasing the yield to 2.3%.
- 7/17: Barclays performed a check on Samsung's Galaxy S4 mini, according to StreetInsider.com, which showed a Qualcomm chip instead of the usual Broadcom WLAN combo chip. The firm believes that this could potentially be a trend moving forward.
- 7/17: According to a post on Benzinga.com, at the Delivering Alpha Conference, Leon Cooperman of Omega Advisors mentioned Qualcomm as one of his favorite picks for 2013. His firm owns approximately $220 million worth of Qualcomm's stock.
- 7/10: According to a post on StreetInsider.com, Canaccord Genuity lowered its price target on Qualcomm from $85 to $84, while maintaining a Buy rating. The firm cites a slightly lower global smartphone sales estimate.
Qualcomm shares are essentially flat on the year. When compared to the broader market, which is up over 18%, it seems Qualcomm has some catching up to do. The 50-day SMA crossed below the 200-day earlier this month - a bearish signal. However, the shares bounced off longer-term support near $59. If earning results surprise to the upside, look for initial resistance at the aforementioned moving averages near $62.50, followed by $64.50. (Chart courtesy of StockCharts.com)
Qualcomm shares are stabilizing ahead of 3Q 2013 earnings, though there are valid concerns over the outlook for smartphones and intense competition. But with solid fundamentals, a strong market position, exposure to emerging economies, and a favorable valuation backdrop, any weakness may be priced in. Watch for earnings on Tuesday from Apple and Broadcom for clues.
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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.