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Can Modest Revenue Growth Propel Qualcomm (QCOM) Q4 Earnings?

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Qualcomm Incorporated (QCOM - Free Report) is set to report fourth-quarter and fiscal 2021 results on Nov 3, after the closing bell. In the last reported quarter, the company delivered an earnings surprise of 15%. It pulled off a trailing four-quarter earnings surprise of 13.5%, 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 the world’s first drone platform and reference design to offer 5G and AI capabilities. The Qualcomm Flight RB5 5G Platform will help accelerate the development of commercial drones and unlock innovative possibilities for industries to adopt high-performance drone solutions. Built with enhanced autonomy and intelligence features, it offers powerful computing at low power with AI, 5G, and long-range Wi-Fi 6 connectivity. Powered by the Qualcomm QRB5165 processor, its heterogeneous computing at ultra-low power consumption provides efficient inference at the edge for AI and ML, enabling fully autonomous drones. Such innovative products are likely to have translated into higher revenues in the quarter.

In the fiscal fourth quarter, Qualcomm inked an agreement with chipset manufacturer GlobalFoundries to manufacture state-of-the-art 5G multi-gigabit speed RF front-end products owing to their increasing demand. The firms extended their RF collaboration to offer sturdy low-power semiconductor solutions with high cellular speeds, maximum power efficiency, and enhanced coverage. These innovative offerings are specifically designed to power 5G-enabled connected devices with revolutionary coverage and ubiquitous mobility. This is likely to get reflected in the upcoming results.

During the quarter, Qualcomm partnered with Google and Renault Group to create an immersive in-vehicle experience for Renault’s next-generation electric vehicle — Mégane E-TECH Electric. The automobile manufacturer will capitalize on Qualcomm’s 3rd Generation Snapdragon Automotive Cockpit Platforms and built-in Google apps and services to power the vehicle’s infotainment system and in-vehicle customer applications. It also collaborated with a leading digital health and IoT-enablement platform, Zyter, to accelerate the adoption of AI-based IoT technologies for enhanced construction safety. The alliance is enabled through the Qualcomm Smart Cities Accelerator Program and Qualcomm IoT Services Suite that deliver comprehensive, end-to-end, IoT as a Service solutions, enabling the digital transformation of smart cities and connected spaces. Such technology collaborations are likely to have translated into top-line growth.

For the September quarter, the Zacks Consensus Estimate for revenues is pegged at $8,877 million, indicating growth of 6.4% from the year-ago quarter’s reported figure. The consensus estimate for adjusted earnings per share is pegged at $2.26, which suggests an increase of 55.9%.

Key Developments in Q4

During the quarter, Qualcomm submitted an offer to acquire Veoneer, Inc. in an all-stock deal for $37.00 per share. The transaction is likely to give Qualcomm a firmer footing in the emerging market of driver-assistance technology, as it aims to extend the Snapdragon Ride Advanced Driver Assistance Systems portfolio. The deal was subsequently inked in October along with New-York based investment firm SSW Partners, which will first acquire all the shares of Veoneer and then sell its Arriver business to Qualcomm while retaining its other Tier-1 supplier businesses until it finds strategic partners to offload the same.

Earnings Whispers

Our proven model predicts an earnings beat for Qualcomm for the fiscal fourth 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 perfectly the case here.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +0.35% with the former pegged at $2.27 and the latter at $2.26. 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.

Other Stocks to Consider

Here are some other companies you may want to consider, as our model shows that these too have the right combination of elements to post an earnings beat this season:

Bandwidth Inc. (BAND - Free Report) is set to release quarterly numbers on Nov 8. It has an Earnings ESP of +85.45% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Earnings ESP for CommScope Holding Company, Inc. (COMM - Free Report) is +7.89% and it carries a Zacks Rank of 3. The company is set to report quarterly numbers on Nov 4.

The Earnings ESP for T-Mobile US Inc. (TMUS - Free Report) is +13.06% and it carries a Zacks Rank of 3. The company is scheduled to report quarterly numbers on Nov 2.

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