It has been about a month since the last earnings report for Qualcomm (
QCOM Quick Quote QCOM - Free Report) . Shares have lost about 3.5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Qualcomm due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Qualcomm Q3 Earnings Beat Estimates, Revenues Falter Qualcomm reported soft third-quarter fiscal 2023 results owing to a challenging macroeconomic environment, inflationary pressures and soft recovery in China, resulting in lower-than-expected demand and elevated inventory levels. While the bottom line beat the Zacks Consensus Estimate, the top line missed the same despite the strength of the business model, revenue diversification and the ability to respond proactively to the evolving market scenario. Shares declined sharply post-earnings release owing to a relatively grim outlook due to limited market visibility and high channel inventory levels. Net Income
On a GAAP basis, net income in the June quarter declined to $1,803 million or $1.60 per share from $3,730 million or $3.29 per share in the prior-year quarter. The decrease in GAAP earnings was primarily attributable to top-line contraction.
Quarterly non-GAAP net income came in at $2,105 million or $1.87 per share compared with $3,356 million or $2.96 per share in the year-ago quarter due to lower-than-expected revenues owing to soft demand trends. The bottom line beat the Zacks Consensus Estimate by 6 cents. Revenues
On a GAAP basis, total revenues in the fiscal third quarter were $8,451 million compared with $10,936 million in the prior-year quarter. The quarterly revenues missed the consensus mark of $8,513 million. Despite solid automotive revenues, the top line decreased on soft demand patterns and elevated inventory levels owing to market uncertainty and macroeconomic woes. High inflationary pressures and soft economic recovery in China further compounded the problems. However, Qualcomm witnessed strong momentum in IoT across consumer, edge networking and industrial sectors, along with strength in Snapdragon portfolio within the automotive sector. Non-GAAP revenues in the reported quarter were $8,442 million compared with $10,928 million in the year-earlier quarter.
Quarterly revenues from Qualcomm CDMA Technologies (
QCT) declined 24% year over year to $7,174 million, as strength in the automotive platform was more than offset by lower demand in handsets and channel inventory drawdown within the IoT business. The segment’s revenues fell short of our revenue estimates of $7,263.2 million. Despite solid potential in the EDGE networking business that helps transform connectivity in cars, business enterprises, homes, smart factories, next-generation PCs, wearables and tablets, the company witnessed lower demand owing to an uncertain landscape. Automotive revenues rose 13% to $434 million, while handset and IoT revenues were down 25% and 24%, respectively, to $5,255 million and $1,480 million. This was the 11th consecutive quarter in which Qualcomm recorded double-digit growth in automotive revenues. EBT margin for the QCT segment decreased to 24% from 32%. Qualcomm Technology Licensing ( QTL) revenues totaled $1,230 million, down 19% year over year due to lower licensing revenues. The segment’s revenues exceeded our estimates of $1,210.6 million. EBT margin declined to 66% from 71%. Cash Flow & Liquidity
Qualcomm generated $2,657 million of net cash from operating activities in the fiscal third quarter compared with $2,895 million a year ago, bringing the respective tallies for the first nine months of fiscal 2023 and fiscal 2022 to $7,209 million and $7,650 million. At quarter-end, the company had $6,087 million in cash and cash equivalents and $14,530 million of long-term debt. The company repurchased 4 million shares for $400 million during the quarter.
For the fourth quarter of fiscal 2023, Qualcomm expects GAAP revenues of $8.1-$8.9 billion due to rapid deterioration in demand and high channel inventory. Management expects the uncertain macroeconomic outlook, high inflation and a slower recovery in China to adversely impact demand as customers remain cautious with their purchasing decisions, further leading to inflated inventory levels. Non-GAAP earnings are projected to be $1.80-$2.00 per share, while GAAP earnings are likely to be $1.37-$1.57 per share. Revenues from QTL are expected to be between $1.15 billion and $1.35 billion. For QCT, the company anticipates revenues between $6.9 billion and $7.5 billion.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
At this time, Qualcomm has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions has been net zero. Notably, Qualcomm has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Qualcomm belongs to the Zacks Wireless Equipment industry. Another stock from the same industry, Nokia (
NOK Quick Quote NOK - Free Report) , has gained 2.6% over the past month. More than a month has passed since the company reported results for the quarter ended June 2023.
Nokia reported revenues of $6.22 billion in the last reported quarter, representing a year-over-year change of -0.7%. EPS of $0.08 for the same period compares with $0.11 a year ago.
For the current quarter, Nokia is expected to post earnings of $0.09 per share, indicating a change of -10% from the year-ago quarter. The Zacks Consensus Estimate has changed -1.8% over the last 30 days.
Nokia has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.