A month has gone by since the last earnings report for Qualcomm (QCOM Quick QuoteQCOM - Free Report) . Shares have added about 3.1% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Qualcomm due for a pullback? 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 Q4 Earnings Beat on 5G Traction

Despite a challenging macroeconomic environment triggered by the coronavirus pandemic, Qualcomm reported solid fourth-quarter fiscal 2020 results, primarily driven by the ramp-up in 5G-enabled chips. Both top and bottom-line figures beat the Zacks Consensus Estimate, backed by the strength of the business model and the ability to respond pro-actively to the evolving market scenario. A long-term settlement deal with Huawei further propelled the stock to a record high, with shares up 14.1% to $147.11 in the aftermarket trading post the earnings release.

Net Income

On a GAAP basis, net income for the September quarter was $2,960 million or $2.58 per share compared with $506 million or 42 cents per share in the prior-year quarter. The significant improvement in GAAP earnings was primarily attributable to an accretive patent settlement agreement with Huawei and royalties related to sales to it.

Quarterly non-GAAP net income came in at $1,669 million or $1.45 per share compared with $947 million or 78 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 top-line growth. The bottom line exceeded management’s guidance and beat the Zacks Consensus Estimate by 26 cents.

In fiscal 2020, GAAP net income increased to $5,198 million or $4.52 per share from $4,386 million or $3.59 per share in fiscal 2019. Non-GAAP earnings in fiscal 2020 were $4,816 million or $4.19 per share compared with $4,323 million or $3.54 per share in fiscal 2019.

Revenues

On a GAAP basis, total revenues in the fiscal fourth quarter were $8,346 million compared with $4,814 million in the prior-year quarter. The radical increase in revenues was driven by 5G ramp up and Huawei settlement with diligent execution of operational plans and resilient business culture acting as the catalysts.

Non-GAAP revenues for the reported quarter were $6,502 million compared with $4,804 million in the year-earlier quarter. The figure surpassed the consensus mark of $5,935 million and was well above the company’s guided range, driven by 5G strength, high-performing core chipsets and new RF front-end content.

In fiscal 2020, GAAP revenues decreased slightly to $23,531 million from $24,273 million, while non-GAAP revenues improved 12% year over year to $21,654 million.

Segment Results

Quarterly non-GAAP revenues from Qualcomm CDMA Technologies (QCT) improved 38% year over year to $4,967 million driven by strength in handsets and higher demand in adjacent platforms beyond mobile (RF front-end, automotive and IoT), coupled with higher Mobile Station Modem (MSM) chip shipments despite adverse coronavirus impacts. MSM shipments in the quarter were 162 million, up from 152 million a year ago with strong rebound in emerging markets. EBT margin increased to 20% from 14%.

Qualcomm Technology Licensing (QTL) revenues totaled $1,507 million, up 30% year over year, driven by higher royalty revenues from Huawei, better-than-expected global handset shipments and a favorable OEM mix. EBT margin was 73% compared with 68% in the year-ago quarter on top-line growth.

Cash Flow & Liquidity

Qualcomm generated $5,814 million of net cash from operating activities in fiscal 2020 compared with $7,286 million a year ago. At fiscal 2020 end, the company had $6,707 million in cash and cash equivalents and $15,226 million of long-term debt compared with respective tallies of $11,839 million and $13,437 million a year ago.

Guidance

For the first quarter of fiscal 2021, Qualcomm expects GAAP revenues of $7.8-$8.6 billion. Non-GAAP earnings are projected to be $1.95-$2.15 per share, while GAAP earnings are likely to be $1.67-$1.87 per share, buoyed by the Huawei settlement. Revenues at QTL are expected between $1.6 billion and $1.8 billion. For QCT, the company anticipates revenues between $6.2 billion and $6.8 billion.

For calendar 2020, Qualcomm continues to expect 175-225 million 5G handset units, while for calendar 2021, 5G handsets are expected to witness 150% year-over-year growth at the midpoint to about 450-550 units. With more than 700 5G design announced or in the development phase, the company remains well poised to gain from solid 5G traction.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

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 an F. However, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been 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.