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Qualcomm (QCOM) Tops Q3 Earnings and Revenues Estimates

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Qualcomm Inc. (QCOM - Free Report) , the largest manufacturer of wireless chipsets based on baseband technology in the U.S., reported strong financial results for the third quarter of fiscal 2017 (ended Jun 25, 2017), wherein both the top and bottom line outpaced the Zacks Consensus Estimate.

Net Income

On a GAAP basis, quarterly net income came in at $866 million or 58 cents per share compared with $1,444 million or 97 cents in the year-ago quarter. Adjusted earnings per share (excluding special items) were 70 cents, ahead of the Zacks Consensus Estimate of 67 cents.

Revenue

Quarterly total revenue of $5,371 million was down 11.1% year over year while surpassing the Zacks Consensus Estimate of $5,221 million.

Segment-wise, Qualcomm Code Division Multiple Access (CDMA) Technologies contributed $4,052 million revenues compared with $3,853 million in the prior-year quarter. EBT (earnings before tax) margin was 14% compared with 9% in the prior-year quarter. Qualcomm Technology Licensing generated $1,172 million, down a whopping 42.5% year over year. EBT margin was 73% compared with 86% in the prior-year quarter.

Chipset Statistics

During the fiscal third quarter, Qualcomm shipped approximately 187 million CDMA-based MSM (Mobile Station Modem) chipsets, reflecting a decline of 7% year over year. This was also below the midpoint of 190 million, which was the third-quarter chipset outlook given by management earlier.

Operating Metrics

Quarterly operating income came in at $773 million compared with $1,592 million in the year-ago quarter. Quarterly operating margin was 14.4% compared with 26.3% in the prior-year quarter. Quarterly EBT was $858 million compared with $1,693 million in the year-ago quarter.

Cash Flow

During the third quarter of fiscal 2017, Qualcomm generated $82 million of cash from operating activities compared with $1,840 million in the prior-year quarter. Free cash flow in the reported quarter was a negative $95 million compared with a positive $1,704 million in the prior-year quarter.

Liquidity

At the end of the third quarter of fiscal 2017, Qualcomm had $20,863 million of cash, cash equivalents and marketable securities compared with $18,648 million at the end of fiscal 2016. Total outstanding debt was $21,898 million at the end of the reported quarter compared with $10,903 million at the end of fiscal 2016. The debt-to-capitalization ratio at the end of the reported quarter was 0.38 compared with 0.24 at the end of fiscal 2016.

Dividend Payment to Stockholders

During the third quarter of fiscal 2017, the company returned nearly $1.1 billion to stockholders. This included $844 million (57 cents per share) of cash dividend and another $300 million through repurchases of 5.2 million shares of common stock.

QUALCOMM Incorporated Price, Consensus and EPS Surprise

 

QUALCOMM Incorporated Price, Consensus and EPS Surprise | QUALCOMM Incorporated Quote

Fourth-Quarter Fiscal 2017 Outlook

Revenues for the fourth quarter of fiscal 2017 are estimated in the range of $5.4–$6.2 billion. GAAP earnings per share are estimated between 55 cents and 65 cents. Non-GAAP earnings per share are estimated between 75 cents and 85 cents. Qualcomm is expected to ship 205–225 million MSM chipsets in the ongoing quarter.

Latest Developments

Qualcomm’s updated Snapdragon processors and applications to retain its leadership in the global wireless baseband chipset market look impressive. The company also moved one step closer to acquiring NXP Semiconductors N.V. (NXPI - Free Report) , with the approval of Snapdragon’s shareholders on Jan 27, 2017. This buyout is expected to close by the end of 2017, subject to regulatory approvals.

On Jul 6, 2017, Qualcomm filed a complaint with the United States International Trade Commission (ITC) against tech giant, Apple Inc. (AAPL - Free Report) , for infringing six of its patents covering various aspects of mobile phone technology. Qualcomm has requested ITC to investigate Apple's infringing imports and issue a Limited Exclusion Order (LEO). The order will ban importation of iPhones and other products linked with the patent in the U.S.

Notably, Qualcomm settled a licensing dispute with BlackBerry Ltd. by paying $940 million, on or before May 31, 2017. This is in relation to the over-payment by BlackBerry to Qualcomm in royalty payments from 2010 to 2015 under terms of a licensing deal.

Both Qualcomm and NXP Semiconductors currently have a Zacks Rank #4 (Sell). Apple carries a Zacks Rank #3 (Hold) while BlackBerry sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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