Zacks_Analysts' Blog : Earnings Scorecard: Qualcomm Inc. - Analyst Blog

Qualcomm Inc. (QCOM) reported excellent fourth quarter 2011 financial results, as revenues exceeded the Zacks Consensus Estimates. The robust result was primarily due to the significant surge in demand for high-end 3G smartphones and tablets.

The company’s Snapdragon platform and product diversification strategy induced management to significantly raise the company’s outlook for fiscal 2012.

Fourth Quarter Highlights

Quarterly total revenue of $4,117 million was up 39.5% year over year and surpassed the Zacks Consensus Estimate of $4,009 million. On a GAAP basis, quarterly net income was $1,056 million or 62 cents per share, compared with $865 million or 58 cents per share in the year-ago quarter.

However, adjusted (excluding special items) EPS of 68 cents in the reported quarter fell just a penny shy of the Zacks Consensus Estimate.

Gross margin was 63.6% compared with 68.6% in the year-ago quarter. Quarterly operating margin was 30.1%, compared to 32.5% in the prior-year quarter. During the reported quarter, Qualcomm shipped approximately 127 million CDMA-based MSM chipsets, up 14% year over year and 6% sequentially. Average selling price (ASP) of mobile handset with an in-build Qualcomm chipset was around $204 -$210 in the quarter.

Agreements of Analysts

Of the 10 analysts covering the stock in the last 7 days, none revised their estimates for the first quarter and second quarter of fiscal 2012. Similarly, for fiscal 2012, out of the 11 analysts covering the stock in last 7 days, none revised their estimates for the given period. Same story for fiscal 2013, as no analysts changed their estimates out of eight covering the stock, .

Currently, the Zacks Consensus EPS Estimate for the first quarter of fiscal 2012 is pegged at 80 cents. The projected annual growth is 16.23%. Similarly, for the second quarter of fiscal 2012, the Zacks Consensus Estimate of 79 cents indicates an annual gain of 2.47%.

Magnitude of Estimate Revisions

During the last 7 days, the Zacks Consensus Estimate for the first and second quarter of 2012 remained in line with the current estimates of 80 cents and 79 cents, respectively. Likewise, for fiscal 2011 and 2012, the Zacks Consensus Estimates were in line with the current estimates of $3.16 and $3.53.

Our Recommendation

We believe Qualcomm’s record-high earnings,strong balance sheet and solid management outlook  will act as positive catalysts in the long run. Moreover, the growing popularity of smartphones and tablets coupled with increased deployment of 3G/4G networks and the recent launch of iPhone 4S by Apple Inc. (AAPL) will further drive the stock upward.

However, recent floods in Thailand coupled with stiff competition from other chipset makers may act as downward catalysts for the stock going forward.

We maintain our long-term Neutral recommendation on Qualcomm. Currently, it has a Zacks #3 Rank, implying a short-term Hold rating on the stock.

About Earnings Estimate Scorecard

Len Zacks, PhD in mathematics from MIT, proved over 30 years ago that earnings estimate revisions are the most powerful force impacting stock prices. He turned this ground breaking discovery into two of the most celebrating stock rating systems in use today. The Zacks Rank for stock trading in a 1 to 3 month time horizon and the Zacks Recommendation for long-term investing (6+ months). These “Earnings Estimate Scorecard” articles help analyze the important aspects of estimate revisions for each stock after their quarterly earnings announcements. Learn more about earnings estimates and our proven stock ratings at: http://www.zacks.com/education/