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Qualcomm (QCOM) Down 12.6% Since Last Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for Qualcomm (QCOM - Free Report) . Shares have lost about 12.6% 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 the most recent earnings report in order to get a better handle on the important drivers.
Qualcomm Trump Q1 Earnings Estimate on 5G Strength
Qualcomm reported solid first-quarter fiscal 2020 results with healthy year-over-year top-line increase, primarily driven by the ramp up of 5G-enabled chips. In addition, both the top and the bottom-line figures beat the respective Zacks Consensus Estimate as the company reached a significant inflection point.
Net Income
On a GAAP basis, net income for the December quarter was $925 million or 80 cents per share compared with $1,068 million or 87 cents per share in the prior-year quarter. The decline in GAAP earnings was primarily attributable to an income tax benefit realized in the year-earlier quarter.
Quarterly non-GAAP net income came in at $1,151 million or 99 cents per share compared with $1,464 million or $1.20 per share in the year-ago quarter. The bottom line exceeded the top end of management’s guidance and beat the Zacks Consensus Estimate by 14 cents.
Revenues
On a GAAP basis, total revenues in the fiscal first quarter were $5,077 million compared with $4,842 million in the prior-year quarter. The figure surpassed the consensus estimate of $4,825 million and was near the higher end of the earlier 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) declined 3.2% year over year to $3,618 million. This was because strength across 5G, RF front-end and adjacent platforms was offset by lower Mobile Station Modem (MSM) chip shipments due to decrease in 4G premium tier shipments. MSM shipments in the quarter were 155 million, down from 186 million. Although EBT margin decreased to 13% from 16% in the year-ago quarter, it was well above the guided range of 10-12%.
Qualcomm Technology Licensing (QTL) revenues were $1,404 million, up 38% year over year and was at the top end of management’s guided range driven by strong licensing business and seasonally high quarter. EBT margin was 72% compared with 58% in the year-ago quarter on lower operating expenses, and was at the mid-point of the company’s guidance.
Cash Flow & Liquidity
Qualcomm generated $1,118 million of net cash from operating activities during the quarter compared with $356 million in the year-ago quarter. At quarter end, the company had $11,109 million in cash and equivalents with $13,437 million of long-term debt.
During the reported quarter, Qualcomm paid out cash dividends totaling $710 million or 62 cents per share and repurchased 9.2 million shares for $762 million. At quarter-end, the company had $6.3 billion available for repurchase under its $30 billion stock buyback program.
Guidance
For the second quarter of fiscal 2020, Qualcomm expects revenues of $4.9-$5.7 billion. Non-GAAP earnings are projected in the 80-95 cents per share range. Revenues at QTL are expected between $1 billion and $1.2 billion. For QCT, the company anticipates revenues between $3.9 billion and $4.5 billion on MSM shipments in the range of 125 million to 145 million units.
For calendar 2020, the company estimates sales of 1.75 billion to 1.85 billion units, up approximately 3% at the midpoint, reflecting flat handsets and low double-digit growth in non-handsets. Qualcomm expects 175 million to 225 million 5G handset units for the year.
Qualcomm anticipates witnessing two inflection points in fiscal 2020. The first inflection point realized during the fiscal first quarter is likely to continue in the first half of fiscal 2020 with continued strength and acceleration of 5G demand. The next inflection point is anticipated to be realized in the fiscal fourth quarter with the launch of additional 5G flagship handsets and is likely to extend into fiscal 2021.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 10% due to these changes.
VGM Scores
At this time, Qualcomm has a subpar Growth Score of D, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. 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 has been net zero. It comes with little surprise Qualcomm has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Qualcomm (QCOM) Down 12.6% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Qualcomm (QCOM - Free Report) . Shares have lost about 12.6% 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 the most recent earnings report in order to get a better handle on the important drivers.
Qualcomm Trump Q1 Earnings Estimate on 5G Strength
Qualcomm reported solid first-quarter fiscal 2020 results with healthy year-over-year top-line increase, primarily driven by the ramp up of 5G-enabled chips. In addition, both the top and the bottom-line figures beat the respective Zacks Consensus Estimate as the company reached a significant inflection point.
Net Income
On a GAAP basis, net income for the December quarter was $925 million or 80 cents per share compared with $1,068 million or 87 cents per share in the prior-year quarter. The decline in GAAP earnings was primarily attributable to an income tax benefit realized in the year-earlier quarter.
Quarterly non-GAAP net income came in at $1,151 million or 99 cents per share compared with $1,464 million or $1.20 per share in the year-ago quarter. The bottom line exceeded the top end of management’s guidance and beat the Zacks Consensus Estimate by 14 cents.
Revenues
On a GAAP basis, total revenues in the fiscal first quarter were $5,077 million compared with $4,842 million in the prior-year quarter. The figure surpassed the consensus estimate of $4,825 million and was near the higher end of the earlier 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) declined 3.2% year over year to $3,618 million. This was because strength across 5G, RF front-end and adjacent platforms was offset by lower Mobile Station Modem (MSM) chip shipments due to decrease in 4G premium tier shipments. MSM shipments in the quarter were 155 million, down from 186 million. Although EBT margin decreased to 13% from 16% in the year-ago quarter, it was well above the guided range of 10-12%.
Qualcomm Technology Licensing (QTL) revenues were $1,404 million, up 38% year over year and was at the top end of management’s guided range driven by strong licensing business and seasonally high quarter. EBT margin was 72% compared with 58% in the year-ago quarter on lower operating expenses, and was at the mid-point of the company’s guidance.
Cash Flow & Liquidity
Qualcomm generated $1,118 million of net cash from operating activities during the quarter compared with $356 million in the year-ago quarter. At quarter end, the company had $11,109 million in cash and equivalents with $13,437 million of long-term debt.
During the reported quarter, Qualcomm paid out cash dividends totaling $710 million or 62 cents per share and repurchased 9.2 million shares for $762 million. At quarter-end, the company had $6.3 billion available for repurchase under its $30 billion stock buyback program.
Guidance
For the second quarter of fiscal 2020, Qualcomm expects revenues of $4.9-$5.7 billion. Non-GAAP earnings are projected in the 80-95 cents per share range. Revenues at QTL are expected between $1 billion and $1.2 billion. For QCT, the company anticipates revenues between $3.9 billion and $4.5 billion on MSM shipments in the range of 125 million to 145 million units.
For calendar 2020, the company estimates sales of 1.75 billion to 1.85 billion units, up approximately 3% at the midpoint, reflecting flat handsets and low double-digit growth in non-handsets. Qualcomm expects 175 million to 225 million 5G handset units for the year.
Qualcomm anticipates witnessing two inflection points in fiscal 2020. The first inflection point realized during the fiscal first quarter is likely to continue in the first half of fiscal 2020 with continued strength and acceleration of 5G demand. The next inflection point is anticipated to be realized in the fiscal fourth quarter with the launch of additional 5G flagship handsets and is likely to extend into fiscal 2021.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 10% due to these changes.
VGM Scores
At this time, Qualcomm has a subpar Growth Score of D, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. 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 has been net zero. It comes with little surprise Qualcomm has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.