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Will Solid Top-Line Growth Buoy Qualcomm (QCOM) Q3 Earnings?

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Qualcomm Incorporated (QCOM - Free Report) is set to report third-quarter fiscal 2021 results on Jul 28, after the closing bell. In the last reported quarter, the company delivered an earnings surprise of 13.8%. It pulled off a trailing four-quarter earnings surprise of 14.6%, on average.

This San Diego, CA-based company is expected to have recorded higher revenues year over year, driven by the ramp-up in 5G-enabled chips and strength in its Snapdragon portfolio. The company continues to benefit from advanced radio frequency (RF) front-end solutions for high-performance 5G devices.

Factors at Play

During the quarter, Qualcomm announced the launch of Snapdragon 888 Plus — an upgraded version of its flagship 5G Snapdragon mobile platform. The new SoC (System-on-Chip) is likely to offer a premium entertainment, connectivity and gaming experience with enhanced features, stirring the interest of several leading handset manufacturers across the globe. Leveraging AI capabilities, Snapdragon 888 Plus helps to run multiple networks simultaneously for an immersive entertainment experience with noise cancellation features to suppress unwanted sound. The company also launched Snapdragon 778G 5G Mobile Platform, which has been specifically designed to deliver enhanced mobile gaming and video experiences on the back of artificial intelligence technology. The solution is expected to power forthcoming high-tier smartphones from iQOO, Xiaomi, Realme, Honor, OPPO and Motorola. This is likely to get reflected in the upcoming results.

In the fiscal third quarter, Qualcomm unveiled a roster of avant-garde Edge IoT solutions to bolster digital transformation across various industries, globally. These include seven new solutions — Qualcomm QCS8250, Qualcomm QCS6490/ QCM6490, Qualcomm QCS4290/ QCM4290, and the Qualcomm QCS2290/ QCM2290. The next-gen solutions have been specifically designed to deliver advanced Edge-AI performance to meet the proliferating needs of the augmented IoT ecosystem for key segments like warehousing, retail and transportation on the back of 5G connectivity capabilities. Qualcomm also introduced the world’s first 10 gigabit X65 and X62 5G M.2 Reference Designs to drive the adoption of 5G technology across various industry segments such as Customer Premises Equipment, Always-Connected PCs and gaming. Such innovative products are likely to have translated into higher revenues in the quarter.

During the quarter, Qualcomm partnered with Nokia and U.S. Cellular to successfully conduct a field trial of 5G mmWave solution in a commercial network. The test results are likely to sow the seeds of an extended 5G coverage across rural areas with improved connectivity and low latency features. This followed a similar collaboration with Ericsson, U.S. Cellular and Inseego to conduct a trial across extended-range 5G mmWave in order to expand broadband services across rural, suburban, and urban environments and eliminate potential connectivity challenges. Such technology collaborations are likely to have translated into top-line growth.

The Zacks Consensus Estimate for the Qualcomm CDMA Technologies segment’s revenues is pegged at $6,068 million. It indicates a rise of 59.4% from the year-ago quarter’s reported figure. The higher projection reflects strength in handsets and demand in adjacent platforms beyond mobile (RF front-end, automotive and IoT).

The consensus estimate for Qualcomm Technology Licensing revenues is $1,460 million, which indicates growth of 39.8% year over year. The performance is likely to have been driven by higher royalty revenues from Huawei, global handset shipments and a favorable OEM mix.

For the June quarter, the Zacks Consensus Estimate for revenues is pegged at $7,535 million, indicating growth of 54% from the year-ago quarter’s reported figure. The consensus estimate for adjusted earnings per share is pegged at $1.67, which suggests an increase of 94.2%.

Earnings Whispers

Our proven model does not predict an earnings beat for Qualcomm for the fiscal third quarter. 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 -0.82% with the former pegged at $1.66 and the latter at $1.67. 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 and EPS Surprise

QUALCOMM Incorporated price-eps-surprise | QUALCOMM Incorporated Quote

Zacks Rank: Qualcomm has a Zacks Rank #3.

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:

Nokia Corporation (NOK - Free Report) is set to release quarterly numbers on Jul 29. It has an Earnings ESP of +9.09% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Earnings ESP for InterDigital, Inc. (IDCC - Free Report) is +38.78% and it carries a Zacks Rank of 3. The company is set to report quarterly numbers on Aug 5.

The Earnings ESP for T-Mobile US Inc. (TMUS - Free Report) is +13.75% and it carries a Zacks Rank of 3. The company is scheduled to report quarterly numbers on Jul 29.