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Will Solid Top-Line Growth Buoy Qualcomm (QCOM) Q1 Earnings?
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Qualcomm Incorporated (QCOM - Free Report) is scheduled to report first-quarter fiscal 2021 results on Feb 3, after the closing bell. In the last reported quarter, the company delivered a positive earnings surprise of 21.9%, surpassing the Zacks Consensus Estimate by 26 cents. In the fiscal first quarter, consolidated revenues are likely to have improved significantly year over year, despite coronavirus-induced headwinds due to continued 5G chip designs for innovative 5G system solutions and recurring income from license agreements with Huawei.
Factors at Play
During the fiscal first quarter, Qualcomm secured green signal from the Trump administration to supply 4G chips to China-based Huawei Technologies, paving its way to provide some key raw materials for 4G mobile devices despite stringent U.S. trade restrictions. Markedly, Qualcomm had earlier inked a settlement agreement with Huawei to resolve previous disputes related to its license agreement that expired on Dec 31, 2019. The company also entered into a new long-term, global patent license agreement, including cross-license rights to certain Huawei’s patents, covering sales beginning Jan 1, 2020. This has ensured recurring payments to the mobile chip manufacturer. The resumption of chip supply is likely to have translated into incremental revenues for the company in the quarter under review.
In a concerted effort to reinforce the growing influence of 5G technology, Qualcomm collaborated with Ericsson, Swisscom and handset maker — Oppo — to execute live 5G Voice over New Radio and data calls over a commercial 5G Standalone network. The groundbreaking test leveraged Qualcomm’s Snapdragon X60 5G Modem-RF System and was primarily focused on providing a streamlined 5G network while creating lucrative opportunities for operators with an enhanced customer experience. Meanwhile, the 5G carrier aggregation milestone was made possible with Snapdragon 888 5G Mobile Platform. Such technology collaborations are likely to have boosted the quarterly performance.
During the fiscal first quarter, Qualcomm joined forces with DISH Network to assist it with the deployment of 5G network on the back of open and cloud-based solutions. It is likely to fast-track the commercialization of Virtualized RAN with the deployment of scalable 5G networks in the competitive North American market. Qualcomm also facilitated the deployment of 5G millimeter Wave network at South Korea’s Kumoh National Institute of Technology in collaboration with LG Uplus and LG Electronics. These initiatives, directed at bolstering the commercialization of 5G mmWave globally, are likely to have contributed to top-line growth in the to-be-reported quarter.
However, the company expects a significant impact on device shipment due to the lengthening of handset replacement rates stemming from the adverse economic impact of the coronavirus pandemic. This, in turn, is likely to have affected unit volumes. For the first quarter of fiscal 2021, Qualcomm expects GAAP revenues of $7.8-$8.6 billion. The Zacks Consensus Estimate for the same is pegged at $8,299 million. The company recorded revenues of $5,077 million in the year-earlier quarter. Management anticipates non-GAAP earnings of $1.95-$2.15 per share. The consensus mark for earnings is currently pegged at $2.10 per share. Qualcomm recorded non-GAAP earnings of 99 cents per share in the prior-year quarter.
Q1 Developments
During the quarter, Qualcomm suffered a setback when certain media reports revealed that Apple is developing its own modem for its future devices. Qualcomm modems have been a key feature in the latest iPhone models, connecting the device to cellular networks for fast web browsing and instant app access. Built on indigenous technology that requires specialized engineering expertise and broad industry know-how, these modems have been the hallmark of impeccable performance standards. According to industry grapevines, Apple is mulling to replace Qualcomm modems in the long run, likely eliminating third-party dependency with in-house products. It remains to be seen whether Apple honors its earlier six-year license agreement with the availability of its own modem.
Earnings Whispers
Our proven model does not predict an earnings beat for Qualcomm this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is not the case here.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is -0.05%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Qualcomm currently has a Zacks Rank #2.
Stocks to Consider
Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season:
The Earnings ESP for Cambium Networks Corporation (CMBM - Free Report) is +6.75% and it carries a Zacks Rank of 3. The company is set to report quarterly numbers on Feb 18.
The Earnings ESP for Arista Networks, Inc. (ANET - Free Report) is +0.76% and it carries a Zacks Rank of 3. The company is scheduled to report quarterly numbers on Feb 18.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
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Will Solid Top-Line Growth Buoy Qualcomm (QCOM) Q1 Earnings?
Qualcomm Incorporated (QCOM - Free Report) is scheduled to report first-quarter fiscal 2021 results on Feb 3, after the closing bell. In the last reported quarter, the company delivered a positive earnings surprise of 21.9%, surpassing the Zacks Consensus Estimate by 26 cents. In the fiscal first quarter, consolidated revenues are likely to have improved significantly year over year, despite coronavirus-induced headwinds due to continued 5G chip designs for innovative 5G system solutions and recurring income from license agreements with Huawei.
Factors at Play
During the fiscal first quarter, Qualcomm secured green signal from the Trump administration to supply 4G chips to China-based Huawei Technologies, paving its way to provide some key raw materials for 4G mobile devices despite stringent U.S. trade restrictions. Markedly, Qualcomm had earlier inked a settlement agreement with Huawei to resolve previous disputes related to its license agreement that expired on Dec 31, 2019. The company also entered into a new long-term, global patent license agreement, including cross-license rights to certain Huawei’s patents, covering sales beginning Jan 1, 2020. This has ensured recurring payments to the mobile chip manufacturer. The resumption of chip supply is likely to have translated into incremental revenues for the company in the quarter under review.
In a concerted effort to reinforce the growing influence of 5G technology, Qualcomm collaborated with Ericsson, Swisscom and handset maker — Oppo — to execute live 5G Voice over New Radio and data calls over a commercial 5G Standalone network. The groundbreaking test leveraged Qualcomm’s Snapdragon X60 5G Modem-RF System and was primarily focused on providing a streamlined 5G network while creating lucrative opportunities for operators with an enhanced customer experience. Meanwhile, the 5G carrier aggregation milestone was made possible with Snapdragon 888 5G Mobile Platform. Such technology collaborations are likely to have boosted the quarterly performance.
During the fiscal first quarter, Qualcomm joined forces with DISH Network to assist it with the deployment of 5G network on the back of open and cloud-based solutions. It is likely to fast-track the commercialization of Virtualized RAN with the deployment of scalable 5G networks in the competitive North American market. Qualcomm also facilitated the deployment of 5G millimeter Wave network at South Korea’s Kumoh National Institute of Technology in collaboration with LG Uplus and LG Electronics. These initiatives, directed at bolstering the commercialization of 5G mmWave globally, are likely to have contributed to top-line growth in the to-be-reported quarter.
However, the company expects a significant impact on device shipment due to the lengthening of handset replacement rates stemming from the adverse economic impact of the coronavirus pandemic. This, in turn, is likely to have affected unit volumes. For the first quarter of fiscal 2021, Qualcomm expects GAAP revenues of $7.8-$8.6 billion. The Zacks Consensus Estimate for the same is pegged at $8,299 million. The company recorded revenues of $5,077 million in the year-earlier quarter. Management anticipates non-GAAP earnings of $1.95-$2.15 per share. The consensus mark for earnings is currently pegged at $2.10 per share. Qualcomm recorded non-GAAP earnings of 99 cents per share in the prior-year quarter.
Q1 Developments
During the quarter, Qualcomm suffered a setback when certain media reports revealed that Apple is developing its own modem for its future devices. Qualcomm modems have been a key feature in the latest iPhone models, connecting the device to cellular networks for fast web browsing and instant app access. Built on indigenous technology that requires specialized engineering expertise and broad industry know-how, these modems have been the hallmark of impeccable performance standards. According to industry grapevines, Apple is mulling to replace Qualcomm modems in the long run, likely eliminating third-party dependency with in-house products. It remains to be seen whether Apple honors its earlier six-year license agreement with the availability of its own modem.
Earnings Whispers
Our proven model does not predict an earnings beat for Qualcomm this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is not the case here.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is -0.05%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
QUALCOMM Incorporated Price and EPS Surprise
QUALCOMM Incorporated price-eps-surprise | QUALCOMM Incorporated Quote
Zacks Rank: Qualcomm currently has a Zacks Rank #2.
Stocks to Consider
Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season:
T-Mobile US, Inc. (TMUS - Free Report) is set to release quarterly numbers on Feb 4. It has an Earnings ESP of +11.17% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Earnings ESP for Cambium Networks Corporation (CMBM - Free Report) is +6.75% and it carries a Zacks Rank of 3. The company is set to report quarterly numbers on Feb 18.
The Earnings ESP for Arista Networks, Inc. (ANET - Free Report) is +0.76% and it carries a Zacks Rank of 3. The company is scheduled to report quarterly numbers on Feb 18.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>