Qualcomm (QCOM) Q3 Earnings & Revenues Top Despite Trade Woes

Qualcomm Incorporated QCOM reported healthy third-quarter fiscal 2019 financial results, wherein both the top line and the bottom line beat the Zacks Consensus Estimate.

However, the chipmaker believes that the Huawei export ban along with the global transition from 4G to 5G, which accelerated over the past couple of months, has led to challenging industry conditions, particularly in China. This is likely to create headwinds in the next two fiscal quarters.

Net Income

On a GAAP basis, net income for the June quarter was $2,149 million or $1.75 per share compared with $1,202 million or 81 cents per share in the prior-year quarter.

Quarterly non-GAAP net income came in at $982 million or 80 cents per share compared with $1,491 million or $1 per share in the year-ago quarter. The figure was at the high end of management’s guidance range due to better Qualcomm CDMA Technologies (QCT) gross margin, and lower R&D and SG&A expenses. The bottom line beat the Zacks Consensus Estimate by 4 cents.

QUALCOMM Incorporated Price, Consensus and EPS Surprise

 

QUALCOMM Incorporated Price, Consensus and EPS Surprise

QUALCOMM Incorporated price-consensus-eps-surprise-chart | QUALCOMM Incorporated Quote

Revenues

On a GAAP basis, total revenues for the fiscal third quarter were $9,635 million compared with $5,577 million in the prior-year quarter. This included $4.7 billion related to the settlement agreements with Apple Inc. AAPL and its contract manufacturers, which were not allocated to segment results. The figure surpassed the consensus estimate of $5,112 million.

Quarterly non-GAAP revenues came in at $4,894 million compared with $5,607 million in the year-ago quarter, reflecting slower demand for 4G devices.

Segment Results

Revenues from QCT declined 12.7% year over year to $3,567 million, due to weakening demand for 4G solutions. Mobile Station Modem (MSM) chip shipments were 156 million, down from 199 million. EBT margin decreased to 14% from 15% in the prior-year quarter.

Qualcomm Technology Licensing (QTL) revenues were $1,292 million, down 10.5% year over year. The figure came in slightly above the midpoint of management’s guidance range, and included both current period Apple royalties and the last $150 million interim payment from Huawei. EBT margin was 70% compared with 71% in the year-ago quarter. The percentage was above the high end of the company’s guidance range on lower operating expenses due to faster-than-anticipated reduction in excess litigation expenses.

Cash Flow & Liquidity

For the first nine months of fiscal 2019, Qualcomm generated $6,059 million of net cash from operating activities compared with $4,331 million in the year-ago quarter. As of Jun 30, 2019, the company had $13,923 million in cash and equivalents with $13,426 million of long-term debt.

During the reported quarter, Qualcomm paid out cash dividends totaling $755 million or 62 cents per share. At quarter-end, the company had $7.8 billion available for repurchase under its stock buy-back program.

Fiscal Q4 Outlook

For the fourth quarter of fiscal 2019, Qualcomm currently expects revenues in the range of $4.3-$5.1 billion. Non-GAAP earnings are projected in the 65-75 cents per share range. Revenues at QTL are expected between $1 billion and $1.2 billion. For QCT, the company anticipates MSM shipments in the range of 140 million to 160 million units.

Zacks Rank & Stocks to Consider

Qualcomm currently has a Zacks Rank #4 (Sell). A couple of better-ranked stocks in the industry include Comtech Telecommunications Corp. CMTL, sporting a Zacks Rank #1 (Strong Buy), and Nokia Corp. NOK, carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Comtech surpassed earnings estimates in each of the trailing four quarters, the average positive surprise being 216.7%.

Nokia surpassed earnings estimates thrice in the trailing four quarters, the average positive surprise being 89.3%.

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