Qualcomm Tops, Outlook Robust

Zacks

Qualcomm Inc. (QCOM) reported strong financial results for the first quarter of fiscal 2013, on the back of a significant surge in demand for the smartphones and tablets, easily beating the Zacks Consensus Estimates. Moreover, management has raised its outlook for fiscal 2013 primarily due to gradual adoption of LTE networks in North America, rapid transition from 2G to 3G in China and India, and increasing licensing revenue.  As a result, in the after market trade on NASDAQ, stock price of Qualcomm was up $3.96 (6.23%) to $67.49. Qualcomm currently has a Zacks Rank #2 (Buy).

Revenue

Quarterly total revenue of $6,018 million was up 28.6% year over year, surpassing the Zacks Consensus Estimate of $5,893 million. Segment wise, Qualcomm CDMA Technologies businesses accounted for $4,120 million of revenue in the first quarter, up 34% over the prior-year quarter. Quarterly EBT margin was 26%. Qualcomm Technology Licensing generated $1,757 million in revenue, up 22% year over year. Quarterly EBT margin was 87%. Qualcomm Wireless & Internet segment generated $146 million, down 4% year over year and incurred $3 million of operating losses.

Net Income

On a GAAP basis, quarterly net income from continuing operations was $1,903 million or $1.09 per share compared with a net income of $1,400 million or 81 cents per share in the year-ago quarter. Notably, the first quarter of fiscal 2013 adjusted (excluding special items) earnings per share came in at $1.14, way ahead of the Zacks Consensus Estimate of $1.00.

Chipset Statistics

During the first quarter of fiscal 2013, Qualcomm shipped approximately 182 million CDMA-based MSM chipsets, up 17% year over year. This figure was far better than the company’s guidance of a mid-point of 173 million. Average selling price of mobile handset with an in-build Qualcomm chipset during this quarter was around $224 -$230.

Operating Metrics

Quarterly operating income was $2,088 million compared with an operating income of $1,551 million in the year-ago quarter. Gross margin was 62.8% compared with 62.5% in the year-ago quarter. Quarterly operating margin was 34.7% compared with 33.1% in the prior-year quarter. In the reported quarter, the company returned $428 million (25 cents per share) to its shareholders in the form of cash dividends and repurchased 4.3 million shares of its common stock for a total consideration of $250 million.

Cash Flow

During the first quarter of fiscal 2013, Qualcomm generated $1,975 million of cash from operations compared with $1,779 million in the prior-year quarter. Free cash flow (cash flow from operations less capital expenditures) during the reported quarter was $1,770 million compared with $1,420 million in the year-ago quarter.

Liquidity

At the end of the first quarter of fiscal 2013, Qualcomm had $28,371 million of cash and marketable securities and no outstanding debt on its balance sheet compared with $26,837 million of cash and marketable securities and no outstanding debt at the end of fiscal 2012.

Second Quarter of Fiscal 2013 Financial Guidance

The second-quarter revenue will be within the range of $5.8 billion - $6.3 billion. Non-GAAP earnings per share will be within the range of $1.10 - $1.18. GAAP earnings per share will be within the range of 98 cents – $1.06. Qualcomm is expected to ship 163 million – 173 million MSM chipsets during the second quarter of fiscal 2013.

Full Fiscal 2013 Financial Guidance

Fiscal 2013 revenue will be within the range of $23.4 billion - $24.4 billion. Non-GAAP earnings per share will be within the range of $4.25 - $4.45. GAAP earnings per share will be within the range of $3.61 - $3.81. ASP of mobile handset with an in-build Qualcomm chipset during fiscal 2013 will be around $214 -$226.

Other Stocks to Consider

Other stocks to consider in the semiconductor market are Intel Corp. (INTC), Texas Instruments Inc. (TXN) and Broadcom Corp. (BRCM). All the three companies handily beat the Zacks Consensus Estimates in the most recent quarter. While Broadcom currently has a Zacks Rank #2 (Buy), both Intel and Texas Instruments carry a Zacks Rank #3 (Hold) on the stock.

Read the Full Research Report on INTC

Read the Full Research Report on TXN

Read the Full Research Report on BRCM

Read the Full Research Report on QCOM

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