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What's in the Cards for Qualcomm (QCOM) in Q4 Earnings?
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Qualcomm Inc. (QCOM - Free Report) , the largest manufacturer of wireless chipsets based on baseband technology in the U.S., is scheduled to report fourth-quarter fiscal 2016 numbers on Nov 2, after market close.
Last quarter, the company posted an impressive 24.10% positive earnings surprise. Moreover, the company’s earnings surpassed the Zacks Consensus Estimate in all of the past four quarters, with an average beat of 13.22%. Let’s see how things are shaping up for this announcement.
Factors at Play
Qualcomm is expected to gain significantly in China through the signing of new patent license agreements with smartphone makers. The company is actively involved in the production of chipsets for the 5G standard and is planning to outsource the production of its next generation high-end Snapdragon 830 chipset to Samsung Electronics Ltd. Qualcomm is even gearing up for another acquisition and is said to be in talks to buy the Netherlands-based semi-conductor company, NXP Semiconductors NV (NXPI - Free Report) .
Qualcomm’s recent tie-ups with AT&T Inc. (T - Free Report) to evaluate Unmanned Aircraft Systems (UAS) or drones on commercial 4G LTE networks and with Verizon Communications Inc. (VZ - Free Report) , which will see Verizon's IoT platform, ThingSpace, get integrated into Qualcomm Technologies' MDM9206 Category M LTE modem bode well. Additionally, the launch of two new Snapdragon processors – 600E and 410E – for embedded and IoT-related applications along with the world’s first 5G modem Snapdragon X50 and gigabit modem Snapdragon X16 LTE should help the company fortify its foothold in the IoT and technology market.
However, regulatory proceedings against Qualcomm are a major headwind. The European Union (EU) Competition Commission levied charges against the company‘s anti-competitive practices in the chip making industry. Aggressive competition in the mobile phone chipset market may hurt Qualcomm’s profits in the future as well.
Earnings Whispers
Our proven model does not conclusively show that Qualcommis likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here as elaborated below.
Zacks ESP: Qualcomm has an earnings ESP of -2.04%. This is because the Most Accurate estimate is 96 cents while the Zacks Consensus Estimate is pegged higher at 98 cents. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.
Zacks Rank: Qualcomm has a Zacks Rank #3 which increases the predictive power of ESP. However, the company’s negative ESP makes surprise prediction difficult.
Meanwhile, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
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What's in the Cards for Qualcomm (QCOM) in Q4 Earnings?
Qualcomm Inc. (QCOM - Free Report) , the largest manufacturer of wireless chipsets based on baseband technology in the U.S., is scheduled to report fourth-quarter fiscal 2016 numbers on Nov 2, after market close.
Last quarter, the company posted an impressive 24.10% positive earnings surprise. Moreover, the company’s earnings surpassed the Zacks Consensus Estimate in all of the past four quarters, with an average beat of 13.22%. Let’s see how things are shaping up for this announcement.
Factors at Play
Qualcomm is expected to gain significantly in China through the signing of new patent license agreements with smartphone makers. The company is actively involved in the production of chipsets for the 5G standard and is planning to outsource the production of its next generation high-end Snapdragon 830 chipset to Samsung Electronics Ltd. Qualcomm is even gearing up for another acquisition and is said to be in talks to buy the Netherlands-based semi-conductor company, NXP Semiconductors NV (NXPI - Free Report) .
Qualcomm’s recent tie-ups with AT&T Inc. (T - Free Report) to evaluate Unmanned Aircraft Systems (UAS) or drones on commercial 4G LTE networks and with Verizon Communications Inc. (VZ - Free Report) , which will see Verizon's IoT platform, ThingSpace, get integrated into Qualcomm Technologies' MDM9206 Category M LTE modem bode well. Additionally, the launch of two new Snapdragon processors – 600E and 410E – for embedded and IoT-related applications along with the world’s first 5G modem Snapdragon X50 and gigabit modem Snapdragon X16 LTE should help the company fortify its foothold in the IoT and technology market.
However, regulatory proceedings against Qualcomm are a major headwind. The European Union (EU) Competition Commission levied charges against the company‘s anti-competitive practices in the chip making industry. Aggressive competition in the mobile phone chipset market may hurt Qualcomm’s profits in the future as well.
Earnings Whispers
Our proven model does not conclusively show that Qualcommis likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here as elaborated below.
Zacks ESP: Qualcomm has an earnings ESP of -2.04%. This is because the Most Accurate estimate is 96 cents while the Zacks Consensus Estimate is pegged higher at 98 cents. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.
Zacks Rank: Qualcomm has a Zacks Rank #3 which increases the predictive power of ESP. However, the company’s negative ESP makes surprise prediction difficult.
Meanwhile, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
QUALCOMM INC Price and EPS Surprise
QUALCOMM INC Price and EPS Surprise | QUALCOMM INC Quote
Stock to Consider
Here’s a company that has the right combination of elements to post an earnings beat this quarter.
Open Text Corporation (OTEX - Free Report) , with an earnings ESP of +6.12% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here. The company’s earnings surpassed the Zacks Consensus Estimate in two of the previous four quarters.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>