(QCOM - Analyst Report
) recently reported record results for the first quarter of its fiscal 2012. And management raised its guidance going forward, prompting analysts to revise their estimates higher and sending the stock to a Zacks #1 Rank (Strong Buy).
Based on current consensus estimates, analysts project 11% EPS growth from Qualcomm this year and 13% growth next year. It also pays a dividend that yields a solid 1.4%.
Qualcomm manufactures and markets digital wireless telecommunications products and services. It is the inventor of CDMA (code division multiple access), a technology that has become a world standard for the wireless communications industry.
It is headquartered in San Diego, California and has a market cap of $104 billion.
First Quarter Results
Qualcomm reported record results for the first quarter of its fiscal 2012 on February 1. Earnings per share came in at 85 cents, beating the Zacks Consensus Estimate of 79 cents.
Revenue jumped 40% year-over-year to $4.681 billion, also well ahead of the Zacks Consensus Estimate of $4.567 billion. CDMA-based Mobile Station Modem (MSM) shipments were up 32% over the same period.
Meanwhile, operating income increased 32% year-over-year to $1.87 billion.
Management raised both its earnings and revenue guidance for 2012 following strong first quarter results. The company expects to earn between $3.55 and $3.75 per share on revenue growth of 25-32%, up from previous guidance of $3.42 to $3.62 and revenue growth of 20-27%.
This prompted analysts to revise their estimates higher, sending the stock to a Zacks #1 Rank (Strong Buy). Based on consensus estimates, analysts expect 11% EPS growth this year for Qualcomm and 13% growth next year.
The company also generates strong cash flow and has an excellent balance sheet with $22 billion in cash and securities and no long-term debt. This has allowed it to consistently raise its dividend over the last several years.
In fact, since it began paying a regular quarterly dividend in 2003, the company has increased it at a 27% compound annual rate.
It currently yields 1.4%.
The valuation picture looks reasonable for this Zacks #1 Rank (Strong Buy) stock. Shares trade at 17.6x 12-month forward earnings, in-line with the industry median and a discount to its 10-year median of 23.9x.
It sports a PEG ratio of 1.1 based on a consensus long-term EPS growth of 15.4%.
Its price to cash flow ratio of 18.7 is also in-line with the group and well below its historical median of 28.4.
The Bottom Line
With increased management guidance, rising estimates, solid growth projections, a solid 1.4% dividend yield and reasonable valuation, Qualcomm offers plenty to like.
Todd Bunton is the Growth & Income Stock Strategist for Zacks Investment Research and Co-Editor of the Reitmeister Value Investor.