Previewing Earnings for, Qualcomm, Akamai, Starbucks & Others

the Staff
April 24, 2013

Stocks tend to be most volatile around earnings season, when a good or bad report can make or break it. However, a good or even great earnings report doesn't necessarily translate into a huge pop for a stock.

During earnings season, publishes a comprehensive 25- to 40-page Earnings Preview report for the week ahead each Friday.

Over the past year, used the data it has collected to correctly predict investor reactions for approximately two-third of the stocks it's previewed.

In its latest earnings preview, looks at several popular stocks still set to report results, including, Deckers Outdoor (DECK), Qualcomm (QCOM), F5 Networks (FFIV), Akamai (AKAM), Starbucks (SBUX), Baidu (BIDU), and (AMZN).

Here is just a tiny sample of what wrote about Qualcomm:

Qualcomm has beaten analyst EPS estimates seven of the past eight quarters, missing the consensus once. Over that period, the stock has risen the next session six of eight quarters. Seasonally, the stock has risen twice in the last four years.

Last quarter, the company said its profit for the fiscal first-quarter that ended on December 30th rose by 36% to $1.91 billion, or $1.09 per share, from $1.40 billion, or 81 cents per share, in the year-ago quarter.

Excluding stock-based compensation and other items, the company's profit per share was $1.26, compared with the analyst consensus of $1.13.

Revenue grew by 29% to $6.02 billion, topping Wall Street expectations for $5.90 billion in sales.

Its QCT segment (chips) saw revenue rise 34% to $4.12 billion. Pre-tax earnings for the segment were $1.07 billion, up 45%. Qualcomm said it shipped 182 million chips in the quarter, an increase of 17% from a year ago. The ASPs for its chips increased to $22.60 from $22.20 last quarter and from $19.80 a year ago.

QTL segment (licensing) revenue, meanwhile, rose 22% to $1.76 billion. Pre-tax earnings for the segment were $1.52 billion, up 21%. The company said reported device sales totaled $53.3 billion, up 17% year over year. It estimated that there were approximately 210 million to 214 million 3G or 4G units shipped by licensees during the September quarter at an average selling price (ASP) of $224 to $230 per unit.

Qualcomm said it expected March quarter revenue of $5.8-$6.3 billion and adjusted EPS of $1.10 to $1.18 versus the consensus of $5.3 billion in revenue and $1.00 per share of adjusted profit. On a GAAP basis, Qualcomm said its second-quarter earnings per share would be between 98 cents to $1.06. It expects to ship between 163-173 million chips.

For the full year, the company raised its forecast to adjusted EPS of between $4.25-$4.45 on revenue of $23.4-$24.4 billion....

Outside of earnings, Qualcomm's strength is derived from its position as one of the primary arms dealers in the battle over mobile supremacy. Its powerful licensing model provides a steady stream of high-margin revenue and profits, as it books a little license revenue every time a cell phone user around the world switches from a 2G phone to a 3G or 4G phone. It doesn't matter who made the chip that powers the device. Meanwhile, it is also a top chipmaker for high-end smartphones, as its best-in-breed technology is considered the only one to offer a complete processing solution that allows for all the features consumers are looking for, such as WiFi and GPS.

The company has also been shareholder friendly, with a new, larger, share repurchase program and a heftier dividend, both announced in March. Qualcomm boosted its quarterly dividend by 40% to 35 cents per share and said it will buy back $5.0 billion. The new program replaced a $40.0 billion program that still had $2.5 billion remaining. ....

The full earnings analysis includes a look at historical earnings data and EPS trends for the companies above and more; examines past investor reactions to earnings in various contexts; gives options activity analysis; reviews previous-quarter earnings; and gives an opinion on both what earnings will look like and how investors will react based on the aforementioned data points.

Just a few of the correct calls made for Q1 so far were:

  • to be bullish on Netflix (NFLX) ahead of earnings.
  • to be bearish on IBM (IBM) ahead of earnings.
  • to be bullish on Coach (COH) ahead of earnings.
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