Is Qualcomm (QCOM) Likely to Surprise Earnings in Q4?
Qualcomm Incorporated (QCOM) -- the world’s largest mobile chipset developer -- is slated to release its fourth quarter and fiscal 2014 financial numbers on Nov 5, after market close.
Last quarter, Qualcomm delivered a 24.07% positive earnings surprise. Moreover, the company’s earnings have outpaced the Zacks Consensus Estimate in three of the last four quarters, with an average beat of 7.92%. Let’s see how things are shaping up for this announcement.
Factors to be Considered This Quarter
Qualcomm is benefiting from significant growth of 3G/4G LTE (Long-Term Evolution) wireless technologies and smartphones in the emerging markets, particularly in China. Moreover, China’s decision to roll out the 4G LTE technology should further drive Qualcomm’s chip demand, thereby improving revenues in the upcoming quarter.
Notably, Qualcomm’s latest chipsets for WiFi, RF360, multimode 3G and 4G LTE from its flagship Snapdragon platform have been doing extremely well. The company is currently leading the global mobile baseband chipset market.
However, Qualcomm is experiencing several challenges related to its licensing business in China. Management stated that the company is currently facing a royalty dispute with a major customer in China. Moreover, the smartphone market has become intensely competitive resulting in lower Average Selling Price (:ASP), which in turn, may negatively impact Qualcomm’s royalty business. Also, aggressive competition in the mobile phone chipset market may hurt Qualcomm’s profits in the future.
Earnings Whispers?
Our proven model does not conclusively show that Qualcomm is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. Unfortunately, that is not the case here as elaborated below.
Zacks ESP: Qualcomm’s earnings ESP is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are poised at $1.20.
Zacks Rank: Qualcomm carries a Zacks Rank #1 (Strong Buy) which increases the predictive power of ESP. However, a 0.00% ESP makes surprise prediction difficult.
Note that stocks with Zacks Rank #4 and 5 (Sell-rated stocks) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some companies to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
Lumos Networks Corp. (LMOS), with earnings ESP of +15.39% and a Zacks Rank #2 (Buy).
DragonWave Inc. (DRWI), with earnings ESP of +16.67% and a Zacks Rank #3 (Hold).
CenturyLink, Inc. (CTL), with earnings ESP of +1.61% and a Zacks Rank #3.
Read the Full Research Report on QCOM
Read the Full Research Report on CTL
Read the Full Research Report on DRWI
Read the Full Research Report on LMOS
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