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Qualcomm (QCOM) Down 13.6% Since Last Earnings Report: Can It Rebound?
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It has been about a month since the last earnings report for Qualcomm (QCOM - Free Report) . Shares have lost about 13.6% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Qualcomm due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Qualcomm Q1 Earnings Beat on Solid 5G Chip Demand
Qualcomm reported solid first-quarter fiscal 2021 results with record earnings, primarily driven by the ramp-up in 5G-enabled chips. Both the top and bottom-line figures increased year over year, backed by the strength of the business model and the ability to respond pro-actively to the evolving market scenario.
Net Income
On a GAAP basis, net income in the December quarter more than doubled to $2,455 million or $2.12 per share from $925 million or 80 cents per share in the prior-year quarter. The significant improvement in GAAP earnings was primarily attributable to top-line growth driven by surging demand of 5G products across handsets, along with higher automotive and IoT revenues.
Quarterly non-GAAP net income came in at $2,510 million or $2.17 per share compared with $1,151 million or 99 cents in the year-ago quarter. Undeterred by the adverse impact of the virus outbreak, record high non-GAAP earnings per share were largely driven by higher revenues across the board. The bottom line exceeded management’s guidance and beat the Zacks Consensus Estimate by 7 cents.
Revenues
On a GAAP basis, total revenues in the fiscal first quarter were $8,235 million compared with $5,077 million in the prior-year quarter. The radical increase in revenues was driven by 5G ramp up, higher sales to Apple Inc. and rise in automotive and IoT revenues with diligent execution of operational plans and resilient business culture acting as catalysts.
Non-GAAP revenues in the reported quarter were $8,226 million compared with $5,057 million in the year-earlier quarter. The figure missed the consensus mark of $8,316 million but was within the company’s guided range, driven by 5G strength, high-performing core chipsets and new RF front-end content.
Segment Results
Quarterly revenues from Qualcomm CDMA Technologies (QCT) improved 81% year over year to $6,533 million driven by strength in handsets and higher demand in adjacent platforms beyond mobile (RF front-end, automotive and IoT), coupled with higher chip shipments despite adverse coronavirus impacts. EBT margin increased to 29% from 13%.
Qualcomm Technology Licensing (QTL) revenues totaled $1,660 million, up 18% year over year, driven by higher royalty revenues from Huawei, better-than-expected global handset shipments and a favorable OEM mix. EBT margin was 77% compared with 72% in the year-ago quarter on top-line growth.
Cash Flow & Liquidity
Qualcomm generated $3,175 million of net cash from operating activities in first-quarter fiscal 2021 compared with $1,118 million a year ago. At quarter end, the company had $7,076 million in cash and cash equivalents and $15,231 million of long-term debt.
Guidance
For the second quarter of fiscal 2021, Qualcomm expects GAAP revenues of $7.2-$8 billion. Non-GAAP earnings are projected to be $1.55-$1.75 per share, while GAAP earnings are likely to be $1.17-$1.37 per share, buoyed by the Huawei settlement. Revenues from QTL are expected between $1.25 billion and $1.45 billion. For QCT, the company anticipates revenues between $6 billion and $6.5 billion.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted -5.89% due to these changes.
VGM Scores
At this time, Qualcomm has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Qualcomm has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Qualcomm (QCOM) Down 13.6% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Qualcomm (QCOM - Free Report) . Shares have lost about 13.6% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Qualcomm due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Qualcomm Q1 Earnings Beat on Solid 5G Chip Demand
Qualcomm reported solid first-quarter fiscal 2021 results with record earnings, primarily driven by the ramp-up in 5G-enabled chips. Both the top and bottom-line figures increased year over year, backed by the strength of the business model and the ability to respond pro-actively to the evolving market scenario.
Net Income
On a GAAP basis, net income in the December quarter more than doubled to $2,455 million or $2.12 per share from $925 million or 80 cents per share in the prior-year quarter. The significant improvement in GAAP earnings was primarily attributable to top-line growth driven by surging demand of 5G products across handsets, along with higher automotive and IoT revenues.
Quarterly non-GAAP net income came in at $2,510 million or $2.17 per share compared with $1,151 million or 99 cents in the year-ago quarter. Undeterred by the adverse impact of the virus outbreak, record high non-GAAP earnings per share were largely driven by higher revenues across the board. The bottom line exceeded management’s guidance and beat the Zacks Consensus Estimate by 7 cents.
Revenues
On a GAAP basis, total revenues in the fiscal first quarter were $8,235 million compared with $5,077 million in the prior-year quarter. The radical increase in revenues was driven by 5G ramp up, higher sales to Apple Inc. and rise in automotive and IoT revenues with diligent execution of operational plans and resilient business culture acting as catalysts.
Non-GAAP revenues in the reported quarter were $8,226 million compared with $5,057 million in the year-earlier quarter. The figure missed the consensus mark of $8,316 million but was within the company’s guided range, driven by 5G strength, high-performing core chipsets and new RF front-end content.
Segment Results
Quarterly revenues from Qualcomm CDMA Technologies (QCT) improved 81% year over year to $6,533 million driven by strength in handsets and higher demand in adjacent platforms beyond mobile (RF front-end, automotive and IoT), coupled with higher chip shipments despite adverse coronavirus impacts. EBT margin increased to 29% from 13%.
Qualcomm Technology Licensing (QTL) revenues totaled $1,660 million, up 18% year over year, driven by higher royalty revenues from Huawei, better-than-expected global handset shipments and a favorable OEM mix. EBT margin was 77% compared with 72% in the year-ago quarter on top-line growth.
Cash Flow & Liquidity
Qualcomm generated $3,175 million of net cash from operating activities in first-quarter fiscal 2021 compared with $1,118 million a year ago. At quarter end, the company had $7,076 million in cash and cash equivalents and $15,231 million of long-term debt.
Guidance
For the second quarter of fiscal 2021, Qualcomm expects GAAP revenues of $7.2-$8 billion. Non-GAAP earnings are projected to be $1.55-$1.75 per share, while GAAP earnings are likely to be $1.17-$1.37 per share, buoyed by the Huawei settlement. Revenues from QTL are expected between $1.25 billion and $1.45 billion. For QCT, the company anticipates revenues between $6 billion and $6.5 billion.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted -5.89% due to these changes.
VGM Scores
At this time, Qualcomm has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Qualcomm has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.