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Qualcomm Set To Report Strong Q1

 January 25, 2013 09:39 AM

(By Mani) Qualcomm, Inc. (QCOM) is set to report another strong earnings and revenue growth when it reports first quarter results on Jan.30 on healthy demand for smartphones.

San Diego, California-based Qualcomm makes CDMA chips that power the leading smartphones and tablets and is benefiting from strong smartphone demand across a wide range of its customers, including Apple, Inc. (NASDAQ: AAPL) and Samsung.

Smartphone content is tilting towards multi-mode 3G/LTE and integrated chipsets, which is improving ASPs. Qualcomm's content is designed in most major smartphones, also driving incremental unit shipment growth.

[Related -QUALCOMM, Inc. (NASDAQ:QCOM): Becoming A Core Holding?]

Qualcomm's Snapdragon S4 chip is designed in various smartphones such as the Samsung Galaxy SIII, Nokia Lumia phones while the quad-core Snapdragon S4 Pro chip continues to see strong design traction.

There is more than 420 announced Snapdragon based devices and more than 400 more in design. Current OEM demand remains strong, particularly for high-end performance and multi-mode LTE capabilities. Windows 8 remains a significant opportunity for Qualcomm helping to expand Qualcomm's addressable market.

Wall Street expects Qualcomm to earn $1.12 a share, according to analysts polled by Thomson Reuters. The consensus estimate implies 15 percent growth in earnings from last year when it earned 97 cents a share.

[Related -QUALCOMM, Inc. (QCOM): Did Goldman Lowball With $80 Price-Target?]

Qualcomm has a history of reporting upbeat earnings and has managed to top Street view thrice in the preceding four quarters. Analysts too are becoming more and more positive on the company as the average estimate increased by 12 cents during the past 90 days.

Quarterly revenues are projected to rise 26 percent to $5.9 billion from $4.68 billion in the same quarter last year.

Qualcomm expects first quarter net earnings of 90 to 98 cents per share and adjusted earnings of $1.08 to $1.16 per share. Revenues are expected in the range of $5.6 billion to $6.1 billion, and it expects to ship 168 million to 178 million MSM chips during the first quarter.

For the fourth quarter ended Sept.30, the company reported net income of $1.27 billion or 73 cents per share, compared with $1.06 billion or 62 cents per share last year. Excluding items, it earned 89 cents per share, higher than Street view of 82 cents per share.

Qualcomm, which shipped 141 million MSM units in the September quarter, posted quarterly revenues of $4.87 billion, compared with $4.12 billion last year, while analysts had a consensus revenue estimate of $4.67 billion for the quarter.

Growth for the industry and Qualcomm this year will be concentrated in China where smartphones as-low-as $100. Nonetheless, $100 smartphones have more positive implications for Qualcomm than $25 feature phones.

Moreover, Qualcomm is expanding its product portfolio across multiple tiers, helping drive recurring wins across a range of operating systems. The licensing business, which represents the bulk of earnings, may see a continued uplift as carriers adopt 3G/LTE.

Out of 46 analysts covering the stock, 41 of them rate it as a "strong buy" or "buy," while three analysts recommend a "hold." Two analysts post a " sell" rating on the stock.

Qualcomm currently trades at 15 times its 2013 consensus EPS estimates of $4.33 while netting out cash of $15.38/share, shares trade at 11 times. Shares are approaching their support level of $64.13 while their resistance level is $65.35.



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