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Qualcomm Inc. (QCOM - Analyst Report) is slated to release its fourth-quarter fiscal 2012 results on Wednesday, November 7, after the market closes. The Zacks Consensus Estimate for the reported quarter is pegged at 70 cents, representing an annualized growth of 3.53%.

With respect to earnings surprises, Qualcomm has outperformed the Zacks Consensus Estimate in two of the last four quarters with an average beat of 1.40%.

Third Quarter Recap

On July 18, 2012, Qualcomm reported its third-quarter fiscal 2012 financial results. Quarterly GAAP net income was approximately $1,207 million or 69 cents per share against $1,035 million or 61 cents per share in the prior-year quarter. Adjusted earnings per share (excluding special items) of 73 cents in the reported quarter fell short of the Zacks Consensus Estimate of 77 cents.

Quarterly total revenue surged 28% year over year to $4,626 million, but was below the Zacks Consensus Estimate of $4,690 million. Quarterly operating income was $1,382 million compared with $1,113 million in the year-ago quarter. Quarterly operating margin was 30% compared with 31% in the year-ago quarter.

Agreement of Estimate Revisions

In the last 30 days, out of the total 10 estimates, one estimate moved south while none went up for the fourth quarter of fiscal 2012. The trend remains similar for the first quarter of fiscal 2013 as well.

For fiscal 2012, out of the total 9 estimates one estimate moved south while none moved in the opposite direction in the last 30 days. A similar picture could be seen for fiscal 2013, with one out of 10 estimates moving down while none moved up in the past one month.

Magnitude of Estimate Revisions

Over the last 30 days, the current Zacks Consensus Estimate has deteriorated by a penny for both fourth quarter of fiscal 2012 and first quarter of fiscal 2013. The current Zacks Consensus Estimate remained static at $3.19 for fiscal 2012 over the last 30 days, while the estimate has deteriorated by 2 cents to $3.71 for 2013 over the same time frame.

Our Recommendation

We believe that the gradual adaptation of 4G LTE handsets in the developed markets of the U.S., Japan and South Korea coupled with the huge demand of smartphones and tablets in the emerging economies will drive the stock upward. Moreover, Qualcomm’s flagship snapdragon platform has emerged as a major chipset supplier for Apple’s iPhone 5 which may become a potential growth driver for the company in the near future.

However, stiff competition from rivals like Broadcom Corporation (BRCM - Analyst Report) and Texas Instruments Inc. (TXN - Analyst Report) as well as lower ASP of smartphones will negatively impact Qualcomm’s royalty business going forward.

We maintain our long-term Neutral recommendation on Qualcomm Inc. Currently, the company retains a Zacks #3 Rank, implying a short-term Hold rating.

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