Will Qualcomm’s Fiscal 2Q16 Earnings Beat Analysts’ Estimates?

Qualcomm’s fiscal 2Q16 highlights

With the start of the March 2016 earnings season, the three big names in the semiconductor industry are Qualcomm (QCOM), Intel (INTC), and Advanced Micro Devices (AMD). These companies are set to announce their earnings in the next week.

In this series, we’ll take a look at how fiscal 2Q16 could shake out for Qualcomm, which is set to announce its earnings on April 20, 2016. The company has announced a dividend of $0.53, up 10.4% from its previous dividend of $0.48.

Will Qualcomm’s Fiscal 2Q16 Earnings Beat Analysts’ Estimates?

Qualcomm had tough times in fiscal 2015 due to antitrust regulations, a slowdown in smartphone sales, weak macroeconomic conditions, the strong US dollar, and the reluctance of Chinese (FXI) handset makers to pay licensing fees. However, things are beginning to stabilize as the company enters into new licensing deals and launches new mobile chips.

EPS estimate

For fiscal 2Q16, Qualcomm expects to report non-GAAP (generally accepted accounting principles) EPS (earnings per share) in the range of $0.90–$1.00. Analysts expect the company to report EPS of $0.96.

As you can see in the above graph, the company has topped analysts’ estimates by an average of 6% over the past four quarters. If a similar trend is maintained, the company could post EPS of $1 in fiscal 2Q16, a rise from the $0.97 it reported in fiscal 1Q16.

Revenue estimate

Qualcomm expects its revenue to fall from $5.8 billion in fiscal 1Q16 to somewhere between $4.9 billion and $5.7 billion in fiscal 2Q16 as smartphone sales slow. Analysts expect the company to report revenues of $5.3 billion in fiscal 2Q16.

Over the past two quarters, Qualcomm has been meeting analysts’ revenue estimates. It’s expected to meet analysts’ consensus estimate in fiscal 2Q16 as well.

International Data Corporation expects smartphone shipment growth to slow from 10% in 2015 to 8% in 2016. This trend has affected Qualcomm the most, as it earns its revenue from semiconductors used in mobile devices and wireless networks. The company’s key customers Samsung (SSNLF) and Apple (AAPL) are moving to custom SOCs (systems-on-chip), thus reducing its chip orders.

In the coming few parts of the series, we’ll look at the key areas driving Qualcomm’s revenue growth.