Can Solid Revenue Growth Buoy Qualcomm (QCOM) Q2 Earnings?
Qualcomm Incorporated QCOM is set to report second-quarter fiscal 2022 results on Apr 27, after the closing bell. In the last reported quarter, the company delivered an earnings surprise of 7.3%. It pulled off a trailing four-quarter earnings surprise of 12.2%, on average.
This San Diego, CA-based company is expected to have recorded higher revenues year over year, driven by the ramp-up in 5G-enabled chips and strength in its Snapdragon portfolio. The company is increasingly benefiting from advanced radio frequency front-end solutions for high-performance 5G devices and automotive chips.
Factors at Play
During the quarter, Qualcomm inked an agreement with Z-ONE TECH to provide intelligent cockpit experiences by utilizing the 4th Generation Snapdragon Cockpit Platforms with Z-ONE TECH’s Galaxy Full-Stack Solution 3.0. The 4th Generation Snapdragon Cockpit Platforms are one of the most comprehensive solutions in the automotive industry. These have been designed to address the transition to automotive architecture combining performance, artificial intelligence and safety.
Qualcomm also inked definitive agreements with leading car manufacturers like Volvo, Honda Motor Co., Ltd. and Renault SA to supply automotive chips for their upcoming models. Volvo will leverage Qualcomm’s “Snapdragon Cockpit” chips to produce its electric SUV, which is likely to go into production this year. Honda will use Qualcomm automotive chips for vehicles rolling out in 2023. The company is increasingly focusing on developing electric vehicles and self-driving cars as it aims to no longer introduce any fossil-fuel vehicles and electrify all its upcoming models. Renault has decided to utilize Snapdragon Automotive Cockpit Platforms to power its advanced infotainment system, comprising portrait-sized touchscreen infotainment displays for audio, visual and navigational functions. Such innovative products are likely to have translated into higher revenues in the quarter.
In the fiscal second quarter, Qualcomm in collaboration with Fastweb announced plans to commercialize 5G standalone (SA) millimeter wave on Qualcomm 5G Fixed Wireless Access Platform Gen 2. 5G SA offers lower latency in the core network, support for 5G network virtualization and network slicing. The collaboration aims to support the digital transformation in Italy by providing enhanced connectivity and digital services. These are likely to get reflected in the upcoming results.
For the March quarter, the Zacks Consensus Estimate for revenues is pegged at $10,579 million, indicating growth of 33.3% from the year-ago quarter’s reported figure. The consensus estimate for adjusted earnings per share is pegged at $2.91, which suggests an increase of 53.2%.
Key Developments in Q2
During the quarter, Qualcomm inched closer to completing the acquisition of Veoneer, Inc. from SSW Partners in an all-stock deal worth $4.5 billion, or $37.00 per share. The transaction was subsequently completed on Apr 4, 2022. The transformative deal is expected to offer Qualcomm a firmer footing in the emerging market of driver-assistance technology, as it aims to extend the Snapdragon Ride Advanced Driver Assistance Systems (ADAS) portfolio.
The Arriver business of Veoneer operates the dedicated software unit focused on sensor perception and drive policy, including a full stack of features and functions. With the acquisition, Qualcomm aims to incorporate Arriver's Computer Vision, Drive Policy and Driver Assistance assets into its ADAS portfolio to deliver an open and competitive platform for automakers to better compete with rivals within the self-driving vehicle market. This, in turn, is likely to augment its automotive business as it strives to boost revenues beyond chipmaking for the smartphone market.
Earnings Whispers
Our proven model does not predict an earnings beat for Qualcomm for the fiscal second quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is not the case here.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +0.15%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
QUALCOMM Incorporated Price and EPS Surprise
QUALCOMM Incorporated price-eps-surprise | QUALCOMM Incorporated Quote
Zacks Rank: Qualcomm has a Zacks Rank #4 (Sell).
Stocks to Consider
Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season:
Amazon.com, Inc. AMZN is set to release quarterly numbers on Apr 28. It has an Earnings ESP of +37.95% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Earnings ESP for T-Mobile US, Inc. TMUS is +23.36% and it carries a Zacks Rank of 3. The company is set to report quarterly numbers on Apr 27.
The Earnings ESP for Telephone and Data Systems, Inc. TDS is +34.62% and it carries a Zacks Rank of 3. The company is scheduled to report quarterly numbers on May 5.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
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