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What's in Store for Qualcomm (QCOM) This Earnings Season?

Zacks Equity Research

Qualcomm Incorporated QCOM is scheduled to report second-quarter fiscal 2019 financial results on May 1, after the closing bell. In the last reported quarter, the company delivered a positive earnings surprise of 11.1%. Notably, the chip maker surpassed the Zacks Consensus Estimate in each of the last four quarters, the average beat being 19%.

Let’s find out how things are shaping up prior to the announcement —

What Our Model Says

Our proven model shows that Qualcomm is likely to beat earnings this quarter as it has the two key components. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is exactly the case here as you will see below:

Earnings ESP: Qualcomm’s Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +4.06% as the former is pegged at 74 cents and the latter 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 currently has a Zacks Rank #3. This increases the predictive power of ESP.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.

Factors at Play

During the fiscal second quarter, Qualcomm joined forces with Green Hills Software — a leader in embedded safety and security — to help automakers and Tier-1 suppliers with state-of-the-art solutions for integrated vehicle cockpits. The solutions are designed to support a secure consolidation of Android and Linux-based infotainment processing with critical ASIL (Automotive Safety Integrity Level)-certified vehicle services into a single multicore-based electronic control unit.

The Qualcomm Snapdragon Automotive Cockpit Platforms comprise the Green Hills INTEGRITY real-time operating system, INTEGRITY Multivisor secure virtualization and integrated MULTI ASIL D-qualified software development environment. This is expected to have aided Qualcomm’s top line performance in the to-be-reported quarter.

The company redefined the computing and mobile ecosystem across the globe with the launch of QCA6390 Connectivity system-on-a-chip product. This game changing and arguably the most advanced integrated offering is likely to deliver path-breaking performance in the 5G era and provide it a competitive advantage against rivals.

For the quarter, management expects revenues in the range of $4.4-$5.2 billion. Non-GAAP earnings are projected in the 65-75 cents per share range. Revenues at Qualcomm Technology Licensing (QTL) are expected between $1 billion and $1.1 billion, including $150 million under the interim agreement. This excludes QTL revenues for royalties due on sales of Apple and other products by Apple’s contract manufacturers. EBT margin at QTL is expected between 54% and 58%.

For Qualcomm CDMA Technologies (QCT), the company anticipates around $150 million to $170 million MSM chip shipments, reflecting typical volume seasonality, market weakness particularly in the low and mid tiers, timing of OEM product launches and overall competitive dynamics. EBT margin at QCT is expected to be between 13% and 15%.

Other Stocks to Consider

Here are some other 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:

Cigna Corp. CI with an Earnings ESP of +5.14% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Upland Software, Inc. UPLD with an Earnings ESP of +0.32% and a Zacks Rank #1.

WillScot Corp. WSC with an Earnings ESP of +28.57% and a Zacks Rank #2.

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