Earnings Preview: Qualcomm Q2 2014

Apr.22.14 | About: Qualcomm Inc. (QCOM)

Summary

Qualcomm, Inc. is slated to report 2Q 2014 earnings after the bell on Wednesday, April 23.

Non-GAAP Earnings Per Share: Company guidance is for $1.15 to $1.25. The current Street estimate is $1.22 (range $1.14 to $1.28.

Revenues: Company guidance is for $6.1 bln to $6.7 bln. Analysts expect an increase of 5.8% y/y to $6.48 bln (range $6.26 bln to $6.68 bln).

By: Craig Bowles

Overview

Qualcomm, Inc. (NASDAQ:QCOM) is slated to report 2Q 2014 earnings after the bell on Wednesday, April 23rd. The earnings release is expected at approximately 4:00 p.m. EST with a conference call to follow at 4:45 p.m. that is webcast through Qualcomm Investor Relations.

Outliers And Strategy

Key measures:

  • Non-GAAP Earnings Per Share: Company guidance is for $1.15 to $1.25. The current Street estimate is $1.22 (range $1.14 to $1.28. (Source: Yahoo Finance).
  • Revenues: Company guidance is for $6.1 bln to $6.7 bln. Analysts expect an increase of 5.8% y/y to $6.48 bln (range $6.26 bln to $6.68 bln).

Adjusted Earnings Per Share Guidance / Revenue Guidance (3Q2014 And FY2014):

  • 3Q 2014 Adjusted EPS Guidance will compare to analyst expectations for $1.25 (range $1.14 to $1.32).
  • 3Q 2014 Revenue Guidance will compare to analyst consensus of $6.58 bln (range $6.26 bln to $6.92 bln).
  • FY2014 Adjusted EPS Guidance is currently $5.00 - $5.20 per share after having been increased 5 cents last quarter. Analysts expect $5.13 (range $5.01 - $5.29).
  • FY2014 Revenue Guidance of $26.0 bln to $27.5 bln was given in November and not updated with January's increased EPS guidance. Analyst consensus is $26.79 bln (range $26.08 bln to $27.53 bln).
  • Qualcomm's trailing P/E of 21.9 compares to a five-year average of 23.7 and industry average of 34.7.
  • Insiders have sold 2.4 mln shares the last six months. In March, the company had $2.8 bln to be used for stock buybacks and authorized an additional $5 bln buyback, so now $7.8 bln is available to support the stock price. This is nearly double the available amount two years ago.
  • Qualcomm is compared most often to chipmakers with quarterly results possibly impacting Texas Instruments (NYSE:TXN) and Broadcom (BRCM).
  • Qualcomm shares have a one-day average price change on earnings of 4.70%. Options are pricing in an implied move of 3.82%. Traders have to factor in a combination of current results and forward guidance as the second and third quarter of 2013 saw those quarters report on top of estimates with very different results in the stock price.

Recent News

  • 04/11: ISI Group upgraded Qualcomm to Strong Buy with a $90 price target citing just under $17.3 billion in cash, with negligible debt, according to a post on TheMotleyFool.com.
  • 04/04: Amazon's "Fire TV" runs on Qualcomm's quad-core "Snapdragon 600" microprocessor which is expected to see increased shipments, according to a post on Benzinga.com.
  • 03/24: Qualcomm is expected to gain significantly in China over the near term following the decision from China Mobile to sell only five-mode 4G LTE (long-Term Evolution) handsets only from June 2014, according to a post on Zacks.com.

Technical Review

Qualcomm shares have been somewhat volatile around the 20-day moving average which is trending upward. The recent balance goes down to $77.50 for support. $81.00 is the previous high. As long as the balance areas are moving higher, traders are prone to come in and support any weakness. (Chart courtesy of StockCharts.com)

Summary

Qualcomm earnings releases are a mix of current results and forward guidance that create an often exciting stock price reaction. The company recently named a new CEO, so investors will be alert for any possible policy changes. Earnings estimates have been reduced two cents over the last three months while estimates were increased two cents for next quarter, so the company reporting close to the high end of expectations this quarter would be unexpected support for a stock price push above the current balance area. Otherwise, the stock likely settles back into a support range.

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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.