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Will Solid Top-Line Growth Buoy Qualcomm (QCOM) Q3 Earnings?

Qualcomm Incorporated QCOM will report third quarter results for fiscal year 2021 on July 28, after the closing bell. In the last reported quarter, the company posted a profit surprise of 13.8%. It delivered a lagging earnings surprise over four quarters averaging 14.6%.

This San Diego, CA-based company is expected to see increased revenue year over year, driven by the proliferation of 5G-enabled chips and the strength in its Snapdragon portfolio. The company continues to take advantage of advanced radio frequency (RF) front-end solutions for high-performance 5G devices.

Factors at play

During the quarter, Qualcomm announced the launch of Snapdragon 888 Plus – an upgraded version of its flagship 5G Snapdragon mobile platform. The new SoC (System-on-Chip) is likely to provide a premium entertainment, connectivity and gaming experience with enhanced features, sparking the interest of several leading handset manufacturers around the world. By leveraging AI capabilities, Snapdragon 888 Plus helps to run multiple networks simultaneously for an immersive entertainment experience with noise canceling features to suppress unwanted noise. The company also launched Snapdragon 778G 5G Mobile Platform, which is specifically designed to deliver enhanced mobile gaming and video experiences based on artificial intelligence technology. The solution is expected to power future high-tier smartphones from iQOO, Xiaomi, Realme, Honor, OPPO and Motorola. This is likely to be reflected in upcoming results.

In the fiscal third quarter, Qualcomm unveiled a suite of avant-garde Edge IoT solutions to power digital transformation in various industries worldwide. These include seven new solutions: Qualcomm QCS8250, Qualcomm QCS6490/QCM6490, Qualcomm QCS4290/QCM4290 and the Qualcomm QCS2290/QCM2290. The next-gen solutions are specifically designed to deliver advanced edge AI performance to meet the fast-growing needs of the enhanced IoT ecosystem for key segments such as warehousing, retail and transportation, using 5G connectivity capabilities. Qualcomm also introduced the world’s first 10 Gigabit X65 and X62 5G M.2 Reference Designs to drive the adoption of 5G technology in various industry segments such as Customer Premises Equipment, Always-Connected PCs and Gaming. Such innovative products likely translated into higher revenues in the quarter.

During the quarter, Qualcomm partnered with Nokia and US Cellular to successfully conduct a field trial of the 5G mmWave solution in a commercial network. The test results are likely to sow the seeds for expanded 5G coverage in rural areas with improved connectivity and low latency features. This followed a similar partnership with Ericsson, US Cellular and Inseego to pilot a long-range 5G mmWave to extend broadband services in rural, suburban and urban environments and eliminate potential connectivity issues. Such technology collaborations have likely translated into revenue growth.

Zacks’ consensus estimate for the Qualcomm CDMA Technologies segment revenue is pegged at $6,068 million. It points to an increase of 59.4% from the reported figure of the same quarter a year ago. The higher projection reflects strength in handsets and demand in adjacent platforms beyond mobile (RF front-end, automotive and IoT).

The consensus estimate for Qualcomm Technology Licensing revenue is $1,460 million, indicating a 39.8% year-over-year growth. The performance is likely due to higher royalty income from Huawei, worldwide shipments of handsets and a favorable OEM mix.

For the June quarter, the Zacks Consensus Estimate for revenue is pegged at $7,535 million, indicating a 54% growth from the reported figure for the same quarter last year. The consensus estimate for adjusted earnings per share is set at $1.67, suggesting a 94.2% increase.

Story continues

Revenue whispers

Our proven model predicts no increase in earnings for Qualcomm for the fiscal third quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chance of a win. This is not the case here.

ESP income: The profit ESP, which represents the difference between the most accurate estimate and the Zacks Consensus estimate, is -0.82%, with the former set at $1.66 and the latter at $1.67. You can discover the best stocks to buy or sell before they are reported with our Earnings ESP filter.

QUALCOMM Incorporated Prize and EPS Surprise

QUALCOMM Incorporated Prize and EPS Surprise

QUALCOMM Incorporated price eps surprise | QUALCOMM included quote

Zack’s Rank: Qualcomm has a Zacks Rank #3.

Stocks to Consider

Here are some companies you might want to consider as our model shows they have the right combination of elements to turn a profit this season:

Nokia Corporation NOK will announce quarterly results on July 29. It has a profit ESP of +9.09% and a Zacks rank #3. You can see the full list of current Zacks #1 Rank stocks here.

The profit ESP for InterDigital, Inc. IDCC is +38.78% and has a Zacks ranking of 3. The company will report quarterly earnings on August 5.

The profit ESP for T-Mobile US Inc. TMUS is +13.75% and has a Zacks rank of 3. The company will report quarterly earnings on July 29.

Want the latest recommendations from Zacks Investment Research? Today you can download 7 best stocks for the next 30 days. Click to get this free report

QUALCOMM Incorporated (QCOM): Free Stock Analysis Report

Nokia Corporation (NOK): Free Stock Analysis Report

InterDigital, Inc. (IDCC): Free Stock Analysis Report

TMobile US, Inc. (TMUS): Free Stock Analysis Report

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