A month has gone by since the last earnings report for Qualcomm (QCOM - Free Report) . Shares have lost about 1.6% in that time frame, outperforming 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 the most recent earnings report in order to get a better handle on the important drivers.
QUALCOMM Q4 Earnings and Revenues Surpass Estimates
QUALCOMM reported healthy fourth-quarter fiscal 2018 results backed by proper execution of its strategic priorities to drive technology and product leadership, particularly in 5G. Notably, growth of leading customers in China was a positive for the company both on volume and improving mix of devices. Both the top line and the bottom line surpassed the respective Zacks Consensus Estimate in the quarter.
On a GAAP basis, net loss for the fiscal fourth quarter was $493 million or loss of 35 cents per share against an income of $168 million or 11 cents per share in the year-ago quarter. This was primarily due to higher total costs and expenses. For fiscal 2018, net loss was $4,864 million or loss of $3.32 per share against income of $2,466 million or $1.65 per share a year ago, mainly due to higher income tax expenses.
Quarterly non-GAAP net income came in at $1,280 million or 90 cents per share compared with $1,375 million or 92 cents per share in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by 7 cents.
Fiscal fourth-quarter GAAP revenues were $5,803 million compared with $5,905 million in the prior-year quarter despite stronger-than-expected demand for chips from Chinese customers. For fiscal 2018, GAAP revenues increased 2% year over year to $22,732 million.
Quarterly non-GAAP revenues came in at $5,833 million compared with $5,957 million in the year-ago quarter, surpassing the Zacks Consensus Estimate of $5,535 million.
Qualcomm CDMA Technologies (QCT) revenues remained almost flat at $4,647 million primarily driven by strength in Mobile Station Modem (MSM) chip shipments of 232 million supported by better-than-estimated demand from Chinese OEMs. EBT (earnings before tax) margin was 17% compared with 21% in the prior-year quarter reflecting strong demand trends in China, particularly in the mid and high tiers, offset by the impact of lower share at Apple Inc. (AAPL).
Qualcomm Technology Licensing (QTL) revenues were $1,138 million, down 6.2% year over year. EBT margin was 65% compared with 68% in the prior-year quarter.
Cash Flow and Liquidity
In fiscal 2018, Qualcomm generated $3,895 million of cash from operating activities compared with $5,001 million in fiscal 2017.
As of Sep 30, 2018, the company had $11,777 million of cash and cash equivalents with long-term debt of $15,365 million compared with respective tallies of $35,029 million and $19,398 million a year ago.
During fiscal fourth quarter, Qualcomm returned $21.1 billion to stockholders. This included $866 million (62 cents per share) of dividends and $20.2 billion through repurchases of 254.6 million shares.
First-Quarter Fiscal 2019 Outlook
Revenues for the first quarter of fiscal 2019 are estimated in the range of $4.5-$5.3 billion. Revenues at QTL are expected to be between $1 billion and $1.1 billion. GAAP earnings are estimated between 78 cents and 88 cents per share. Non-GAAP earnings are projected in the $1.05-$1.15 per share range. Qualcomm is expected to ship 175-195 million MSM chipsets in the ongoing quarter. Worth noting, this financial guidance excludes QTL revenues for royalties due on sales of Apple products by Apple’s contract manufacturers as well as sales of products by the other licensee in dispute.
Qualcomm expects further growth from its China business in fiscal 2019, particularly in the second half. The chip maker remains focused around three key priorities, the primary among which is to drive the transition to 5G. Secondly, the company aims to resolve its dispute with Apple and lastly, execute well its operating plans across its core product businesses. While Qualcomm expanded its leadership to the high tiers with Snapdragon 700, its Snapdragon 800 solutions will continue defining the premium tier benchmarks. Furthermore, the product mix is improving in the China region and key Qualcomm China-based customers are gaining share globally, most recently in India and Europe, auguring well for its future business growth.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 35.66% due to these changes.
At this time, Qualcomm has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. 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 looks promising. It comes with little surprise Qualcomm has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.