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Will Top-Line Contraction Mar Qualcomm (QCOM) Q4 Earnings?

Zacks Equity Research

Qualcomm Incorporated QCOM is scheduled to report fourth-quarter fiscal 2019 results after the closing bell on Nov 6. In the last reported quarter, the company delivered a positive earnings surprise of 5.3%, surpassing the Zacks Consensus Estimate by 4 cents. For fourth-quarter fiscal 2019, the company is likely to have generated lower consolidated revenues on a year-over-year basis, owing to prolonged tariff war and stiff competition from low-priced competitors.

Factors at Play

During the quarter, Qualcomm secured a partial stay on the adverse anti-trust ruling by federal judge Lucy Koh from the United States Court of Appeals for the Ninth Circuit. The company was alleged of violating anti-trust regulations through monopolistic trade practices. The temporary relief, pending appeal, is likely to have aided the chipmaker in safeguarding its business interests and maintain seamless operations.

Nonetheless, tariff war with China, which is one of the most important markets of Qualcomm, is likely to have harmed its supply chain management and strained its margins. In addition, fierce competitive pressure from low-cost rival chipmakers is likely to have affected revenues of the company.

For the fourth quarter of fiscal 2019, Qualcomm expects revenues in the range of $4.3-$5.1 billion. The Zacks Consensus Estimate for the same is pegged at $4,718 million, indicating an 18.7% decline from the year-ago reported number. Management anticipates non-GAAP earnings in the 65-75 cents per share range. The consensus estimate for earnings is currently pegged at 71 cents per share, down 21.1% year over year.

Q4 Developments

During the quarter, Qualcomm inked a new five-year, royalty-bearing patent license deal with LG Electronics Inc. to develop and sell 3G, 4G and 5G smartphones. The company also revealed plans to develop 5G chipsets that are compatible in mid-priced mobiles to make such devices widely available to masses by next year. Furthermore, Qualcomm completed the acquisition of the remaining interest in RF360 Holdings Singapore Pte. Ltd. — a joint venture with TDK Corporation — to create one of the broadest portfolios of integrated and discrete micro-acoustic components in the industry.

Earnings Whispers

Our proven model does not predict an earnings beat for Qualcomm this time around. 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 0.00% with both pegged at 71 cents. 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 and EPS Surprise

QUALCOMM Incorporated price-eps-surprise | QUALCOMM Incorporated Quote

Zacks Rank: Qualcomm has a Zacks Rank #3.

Stocks to Consider

Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Hewlett Packard Enterprise Company HPE is set to release quarterly numbers on Dec 3. It has an Earnings ESP of +8.70% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Earnings ESP for Ubiquiti Inc. UI is +1.18% and it carries a Zacks Rank of 3. The company is slated to report quarterly numbers on Nov 8.

The Earnings ESP for Comtech Telecommunications Corp. CMTL is +7.14% and it carries a Zacks Rank of 3. The company is set to report quarterly numbers on Dec 5.

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