Qualcomm (QCOM) Tops Q3 Earnings, Revenues; Guides Q4

Qualcomm Inc. (NASDAQ:QCOM) reported an impressive financial result in the third quarter of 2016 wherein both the top and the bottom line surpassed past the Zacks Consensus Estimate.

Net Income

On a GAAP basis, quarterly net income from operations stood at $1,444 million or 97 cents per share compared with $1,184 million or 73 cents, respectively, in the year-ago quarter. Meanwhile, adjusted (excluding special items) earnings per share came in at $1.03, beating the Zacks Consensus Estimate of 83 cents.

Revenue

Total quarterly revenue of $6,044 million was up 3.6% year over year outpacing the Zacks Consensus Estimate of $5,553 million. Segment-wise, Qualcomm CDMA Technologies businesses contributed $3,853 million to its revenues in the third quarter, up 15% from the prior-year quarter and its quarterly EBT margin stood at 9% while Qualcomm Technology Licensing generated $2,038 million in revenues, down 5% year over year and its quarterly EBT margin was 86%.

Chipset Statistics

During the third quarter of 2016, Qualcomm shipped approximately 201 million CDMA-based MSM chipsets, down 11% year over year. This figure managed to surpass the mid-point of the company’s guidance which was pegged at 185 million. Average selling price (ASP) of a 3G/4G handset with an in-built Qualcomm chipset during the quarter was around $191-$197. The company’s chipsets are used in Apple Inc.’s (NASDAQ:AAPL) iPhone, Alphabet Inc. (NASDAQ:GOOGL) -developed Android smartphones and Microsoft Corp.’s (NASDAQ:MSFT) Windows handsets.

Operating Metrics

Quarterly operating income came in at $1,592 million compared with $1,235 million in the year-ago quarter. Quarterly operating margin was 26.3% compared with 21.2% in the prior-year quarter. Quarterly adjusted EBT was $1,693 million compared with $1,398 million in the year-ago quarter. In the reported quarter, the company returned nearly $781 million (53 cents per share) to its shareholders in the form of cash dividends and another $1 billion through the repurchase of 1.8 million shares of common stock.

Cash Flow

During the third quarter, Qualcomm generated $1,840 million of cash from operating activities against $2,116 million in the prior-year quarter. Free cash flow (to the firm), in the reported quarter, was $1110 million as against $613 million in the year-ago quarter.

Liquidity

At the end of the quarter under review, Qualcomm had $5,885 million of cash and cash equivalents and $11,225 million of outstanding debt in its balance sheet compared with $7,560 million and $9,761 million, respectively, at the end of fiscal 2015.

Fourth-Quarter Fiscal 2016 Outlook

Fourth-quarter revenues are estimated to be in the range of $5.4--$6.2 billion, in the mid-point of $5.8 billion just above the current Zacks Consensus Estimate of $5.76 billion. GAAP earnings per share are projected at 84–94 cents. Non-GAAP earnings per share are estimated between $1.05 and $1.15. Its mid-point of $1.1 is above the current Zacks Consensus Estimate of 95 cents. Qualcomm is expected to ship 195–215 million MSM chipsets in the third quarter.

Qualcomm currently carries a Zacks Rank #1 (Strong Buy).