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Why Is Qualcomm (QCOM) Up 10% Since Last Earnings Report?
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It has been about a month since the last earnings report for Qualcomm (QCOM - Free Report) . Shares have added about 10% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Qualcomm due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Qualcomm Beats on Q4 Earnings Despite Lower Revenues
Qualcomm reported relatively soft fourth-quarter fiscal 2023 results owing to a challenging macroeconomic environment, inflationary pressures and soft recovery in China, resulting in lower-than-expected demand and elevated inventory levels. Although the bottom and top line beat the respective Zacks Consensus Estimate, both metrics declined year over year despite the strength of the business model, revenue diversification and the ability to respond proactively to the evolving market scenario. However, shares were up post-earnings release owing to a bullish outlook due to early signs of market stabilization and recovery in demand.
Net Income
On a GAAP basis, net income in the September quarter declined to $1,489 million or $1.32 per share from $2,873 million or $2.54 per share in the prior-year quarter. The decrease in GAAP earnings was primarily attributable to top-line contraction.
Quarterly non-GAAP net income came in at $2,277 million or $2.02 per share compared with $3,548 million or $3.13 per share in the year-ago quarter due to lower-than-expected revenues owing to soft demand trends. The bottom line beat the Zacks Consensus Estimate by 10 cents.
Revenues
On a GAAP basis, total revenues in the fiscal fourth quarter were $8,631 million compared with $11,396 million in the prior-year quarter. The quarterly revenues beat the consensus mark of $8,550 million. Despite solid automotive revenues, the top line decreased on soft industrial IoT demand patterns and elevated inventory levels within the handset business owing to market uncertainty and macroeconomic woes. High inflationary pressures and soft economic recovery in China further compounded the problems. However, Qualcomm witnessed strong momentum in the Snapdragon portfolio within the automotive sector. Non-GAAP revenues in the reported quarter were $8,665 million compared with $11,387 million in the year-earlier quarter.
Segment Results
Quarterly revenues from Qualcomm CDMA Technologies (QCT) declined 26% year over year to $7,374 million, as strength in the automotive platform was more than offset by lower demand in handsets and channel inventory drawdown within the IoT business. The segment’s revenues exceeded our revenue estimates of $7,231.7 million. Despite solid potential in the EDGE networking business that helps transform connectivity in cars, business enterprises, homes, smart factories, next-generation PCs, wearables and tablets, the company witnessed lower demand owing to an uncertain landscape.
Automotive revenues rose 15% to $535 million, while handset and IoT revenues were down 27% and 31%, respectively, to $5,456 million and $1,383 million. This was the 12th consecutive quarter in which Qualcomm recorded double-digit growth in automotive revenues. EBT margin for the QCT segment decreased to 26% from 34%.
Qualcomm Technology Licensing (QTL) revenues totaled $1,262 million, down 12% year over year due to lower licensing revenues. The segment’s revenues missed our estimates of $1,269.3 million. EBT margin declined to 66% from 69%.
Cash Flow & Liquidity
Qualcomm generated $4,090 million of net cash from operating activities in the fiscal fourth quarter compared with $1,446 million a year ago, bringing the respective tallies for fiscal 2023 and fiscal 2022 to $11,299 million and $9,096 million. At fiscal 2023-end, the company had $8,450 million in cash and cash equivalents and $14,484 million of long-term debt compared with respective tallies of $2,773 million and $13,537 million in fiscal 2022. The company repurchased 4 million shares for $400 million during the quarter.
Q1 Guidance
For the first quarter of fiscal 2024, Qualcomm expects GAAP revenues of $9.1-$9.9 billion due to early signs of market stabilization, recovery in market demand with the upcoming holiday season and portfolio strength. Non-GAAP earnings are projected to be $2.25-$2.45 per share, while GAAP earnings are likely to be $1.82-$2.02 per share. Revenues from QTL are expected to be between $1.3 billion and $1.5 billion. For QCT, the company anticipates revenues between $7.7 billion and $8.3 billion.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
VGM Scores
Currently, Qualcomm has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Qualcomm has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Qualcomm belongs to the Zacks Wireless Equipment industry. Another stock from the same industry, Nokia (NOK - Free Report) , has gained 3.9% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.
Nokia reported revenues of $5.42 billion in the last reported quarter, representing a year-over-year change of -13.8%. EPS of $0.05 for the same period compares with $0.10 a year ago.
For the current quarter, Nokia is expected to post earnings of $0.15 per share, indicating a change of -6.3% from the year-ago quarter. The Zacks Consensus Estimate has changed -2.2% over the last 30 days.
Nokia has a Zacks Rank #4 (Sell) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.
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Why Is Qualcomm (QCOM) Up 10% Since Last Earnings Report?
It has been about a month since the last earnings report for Qualcomm (QCOM - Free Report) . Shares have added about 10% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Qualcomm due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Qualcomm Beats on Q4 Earnings Despite Lower Revenues
Qualcomm reported relatively soft fourth-quarter fiscal 2023 results owing to a challenging macroeconomic environment, inflationary pressures and soft recovery in China, resulting in lower-than-expected demand and elevated inventory levels. Although the bottom and top line beat the respective Zacks Consensus Estimate, both metrics declined year over year despite the strength of the business model, revenue diversification and the ability to respond proactively to the evolving market scenario. However, shares were up post-earnings release owing to a bullish outlook due to early signs of market stabilization and recovery in demand.
Net Income
On a GAAP basis, net income in the September quarter declined to $1,489 million or $1.32 per share from $2,873 million or $2.54 per share in the prior-year quarter. The decrease in GAAP earnings was primarily attributable to top-line contraction.
Quarterly non-GAAP net income came in at $2,277 million or $2.02 per share compared with $3,548 million or $3.13 per share in the year-ago quarter due to lower-than-expected revenues owing to soft demand trends. The bottom line beat the Zacks Consensus Estimate by 10 cents.
Revenues
On a GAAP basis, total revenues in the fiscal fourth quarter were $8,631 million compared with $11,396 million in the prior-year quarter. The quarterly revenues beat the consensus mark of $8,550 million. Despite solid automotive revenues, the top line decreased on soft industrial IoT demand patterns and elevated inventory levels within the handset business owing to market uncertainty and macroeconomic woes. High inflationary pressures and soft economic recovery in China further compounded the problems. However, Qualcomm witnessed strong momentum in the Snapdragon portfolio within the automotive sector. Non-GAAP revenues in the reported quarter were $8,665 million compared with $11,387 million in the year-earlier quarter.
Segment Results
Quarterly revenues from Qualcomm CDMA Technologies (QCT) declined 26% year over year to $7,374 million, as strength in the automotive platform was more than offset by lower demand in handsets and channel inventory drawdown within the IoT business. The segment’s revenues exceeded our revenue estimates of $7,231.7 million. Despite solid potential in the EDGE networking business that helps transform connectivity in cars, business enterprises, homes, smart factories, next-generation PCs, wearables and tablets, the company witnessed lower demand owing to an uncertain landscape.
Automotive revenues rose 15% to $535 million, while handset and IoT revenues were down 27% and 31%, respectively, to $5,456 million and $1,383 million. This was the 12th consecutive quarter in which Qualcomm recorded double-digit growth in automotive revenues. EBT margin for the QCT segment decreased to 26% from 34%.
Qualcomm Technology Licensing (QTL) revenues totaled $1,262 million, down 12% year over year due to lower licensing revenues. The segment’s revenues missed our estimates of $1,269.3 million. EBT margin declined to 66% from 69%.
Cash Flow & Liquidity
Qualcomm generated $4,090 million of net cash from operating activities in the fiscal fourth quarter compared with $1,446 million a year ago, bringing the respective tallies for fiscal 2023 and fiscal 2022 to $11,299 million and $9,096 million. At fiscal 2023-end, the company had $8,450 million in cash and cash equivalents and $14,484 million of long-term debt compared with respective tallies of $2,773 million and $13,537 million in fiscal 2022. The company repurchased 4 million shares for $400 million during the quarter.
Q1 Guidance
For the first quarter of fiscal 2024, Qualcomm expects GAAP revenues of $9.1-$9.9 billion due to early signs of market stabilization, recovery in market demand with the upcoming holiday season and portfolio strength. Non-GAAP earnings are projected to be $2.25-$2.45 per share, while GAAP earnings are likely to be $1.82-$2.02 per share. Revenues from QTL are expected to be between $1.3 billion and $1.5 billion. For QCT, the company anticipates revenues between $7.7 billion and $8.3 billion.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
VGM Scores
Currently, Qualcomm has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Qualcomm has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Qualcomm belongs to the Zacks Wireless Equipment industry. Another stock from the same industry, Nokia (NOK - Free Report) , has gained 3.9% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.
Nokia reported revenues of $5.42 billion in the last reported quarter, representing a year-over-year change of -13.8%. EPS of $0.05 for the same period compares with $0.10 a year ago.
For the current quarter, Nokia is expected to post earnings of $0.15 per share, indicating a change of -6.3% from the year-ago quarter. The Zacks Consensus Estimate has changed -2.2% over the last 30 days.
Nokia has a Zacks Rank #4 (Sell) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.