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Will Lower QTL Revenues Dent Qualcomm's (QCOM) Q2 Earnings?
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Qualcomm Incorporated (QCOM - Free Report) is scheduled to report second-quarter fiscal 2020 results after the closing bell on Apr 29. In the fiscal second quarter, revenues from the Qualcomm Technology Licensing (QTL) segment are likely to have decreased due to the adverse impact of the coronavirus pandemic.
Factors at Play
This segment generates revenues from license fees as well as royalties based on global sales by licensees of products incorporating or using Qualcomm’s intellectual property.
During the quarter, the company continued to spend aggressively on R&D to develop innovative 5G designs for OEMs. The deal with Apple, which includes a six-year license agreement along with a two-year extension option and a multi-year chipset supply agreement, is likely to have generated recurring payments. Apple is expected to license the chips directly from Qualcomm instead of relying on OEMs to do it on its behalf.
However, seasonality patterns are likely to have affected the segment’s revenues. In addition, Qualcomm is expected to have been impaired by the virus outbreak as it disrupted normal business operations and supply-chain mechanisms, with several firms preferring to exercise caution and put on hold their delivery schedules until the health risks are neutralized. A ‘supply shock’ caused by factory shutdowns and travel restrictions sparked by the virus added to the woes. The adverse economic impact is further likely to have dented segment revenues as several firms are forced to rethink their business strategies and put certain licensing renewal agreements on hold.
Management expects QTL revenues in the range of $1-$1.2 billion. The Zacks Consensus Estimate for QTL revenues is currently pegged at $1,082 million, indicating a 3.6% decrease from the year-ago quarter’s reported number. The consensus mark for EBT from the segment stands at $652 million, suggesting a decline from $674 million reported a year ago.
Overall Expectations
For the second quarter of fiscal 2020, Qualcomm expects revenues of $4.9-$5.7 billion. The Zacks Consensus Estimate for the same is pegged at $5,094 million. The company reported revenues of $4,982 million in the year-earlier quarter. Management anticipates non-GAAP earnings of 80-95 cents per share. The consensus mark for earnings is currently pegged at 77 cents per share, flat year over year.
Earnings Whispers
Our proven model does not conclusively predict an earnings beat for Qualcomm this time around. 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 -10.65%, with the former being pegged at 69 cents and the latter at 77 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
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 time:
The Earnings ESP for Motorola Solutions, Inc. (MSI - Free Report) is +3.34% and it carries a Zacks Rank of 3. The company is set to report quarterly numbers on May 7.
The Earnings ESP for CenturyLink, Inc. is +1.41% and it carries a Zacks Rank of 3. The company is scheduled to report quarterly numbers on May 6.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
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Will Lower QTL Revenues Dent Qualcomm's (QCOM) Q2 Earnings?
Qualcomm Incorporated (QCOM - Free Report) is scheduled to report second-quarter fiscal 2020 results after the closing bell on Apr 29. In the fiscal second quarter, revenues from the Qualcomm Technology Licensing (QTL) segment are likely to have decreased due to the adverse impact of the coronavirus pandemic.
Factors at Play
This segment generates revenues from license fees as well as royalties based on global sales by licensees of products incorporating or using Qualcomm’s intellectual property.
During the quarter, the company continued to spend aggressively on R&D to develop innovative 5G designs for OEMs. The deal with Apple, which includes a six-year license agreement along with a two-year extension option and a multi-year chipset supply agreement, is likely to have generated recurring payments. Apple is expected to license the chips directly from Qualcomm instead of relying on OEMs to do it on its behalf.
However, seasonality patterns are likely to have affected the segment’s revenues. In addition, Qualcomm is expected to have been impaired by the virus outbreak as it disrupted normal business operations and supply-chain mechanisms, with several firms preferring to exercise caution and put on hold their delivery schedules until the health risks are neutralized. A ‘supply shock’ caused by factory shutdowns and travel restrictions sparked by the virus added to the woes. The adverse economic impact is further likely to have dented segment revenues as several firms are forced to rethink their business strategies and put certain licensing renewal agreements on hold.
Management expects QTL revenues in the range of $1-$1.2 billion. The Zacks Consensus Estimate for QTL revenues is currently pegged at $1,082 million, indicating a 3.6% decrease from the year-ago quarter’s reported number. The consensus mark for EBT from the segment stands at $652 million, suggesting a decline from $674 million reported a year ago.
Overall Expectations
For the second quarter of fiscal 2020, Qualcomm expects revenues of $4.9-$5.7 billion. The Zacks Consensus Estimate for the same is pegged at $5,094 million. The company reported revenues of $4,982 million in the year-earlier quarter. Management anticipates non-GAAP earnings of 80-95 cents per share. The consensus mark for earnings is currently pegged at 77 cents per share, flat year over year.
Earnings Whispers
Our proven model does not conclusively predict an earnings beat for Qualcomm this time around. 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 -10.65%, with the former being pegged at 69 cents and the latter at 77 cents. 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-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 time:
Arista Networks, Inc. (ANET - Free Report) is set to release quarterly numbers on May 5. It has an Earnings ESP of +1.39% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Earnings ESP for Motorola Solutions, Inc. (MSI - Free Report) is +3.34% and it carries a Zacks Rank of 3. The company is set to report quarterly numbers on May 7.
The Earnings ESP for CenturyLink, Inc. is +1.41% and it carries a Zacks Rank of 3. The company is scheduled to report quarterly numbers on May 6.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>