Will Qualcomm (QCOM) Disappoint Investors In Q3 Earnings?

Qualcomm Inc. (NASDAQ:QCOM) , the largest manufacturer of wireless chipsets based on baseband technology, is scheduled to report third-quarter fiscal 2017 numbers on Jul 19, after market closes.

Last quarter, Qualcomm delivered a positive earnings surprise of 14.29%. The company’s earnings surpassed the Zacks Consensus Estimate in three of the previous four quarters, with an average beat of 14.45%.

However, shares of Qualcomm have underperformed the Zacks classified Wireless Equipment industry’s growth over the past three months. The stock inched up 7.86% but failed to beat the industry’s growth of 9.80%.

Let’s see how things are shaping up for this announcement.

Factors at Play

Qualcomm has been facing regulatory proceedings of late. The company continues to receive charges due to unfair business practices and licensing royalty payments. Qualcomm settled a licensing dispute with BlackBerry Limited (NASDAQ:BBRY) by paying $940 million on May 31. Meanwhile, the ongoing $1-billion lawsuit dispute with tech giant Apple Inc. (NASDAQ:AAPL) is getting bitter by the day, affecting the company’s margins.

Aggressive competition in the mobile phone chipset market has been hurting Qualcomm’s profits. The company faces competitive threats from its closest rival, Intel Corporation (NASDAQ:INTC) . Intel has been redesigning its chipsets for the mobile computing market. We wait to see if it dents Qualcomm’s sales in the fiscal second quarter.

Qualcomm’s updated Snapdragon processors and applications look impressive and will aid the company to retain leadership in the global wireless baseband chipset market. Patent license network deals, tie-up with AT&T Inc. (NYSE:T) and Ericsson (BS:ERICAs) for 5G network trials and the launch of China’s first end-to-end data call bode well for Qualcomm’s growth prospects.

Moreover, the company’s foray into areas like automotive, networking and mobile computing are favorable for its growth prospects. We expect such strategic business moves to improve Qualcomm's chipset sales in the to-be-reported quarter.

We are also impressed with the company’s efforts to offer a quarterly cash dividend of $0.57 per common share, payable on Sept 20, 2017, to stockholders of record at the closure of business on Aug 30, 2017.

Earnings Whispers

Our proven model does not conclusively show that Qualcomm is likely to beat earnings this quarter. This is because a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.

Zacks ESP: Qualcomm has an Earnings ESP of 0.00%. This is because the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 67 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Qualcomm currently carries a Zacks Rank #4 (Sell).

We caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revisions

Key Picks

MSCI Inc. (NYSE:MSCI) from the Zacks categorized broader Computer and Technology sector, which houses Qualcomm, has the right combination of elements to post an earnings beat in its second-quarter 2017 results on Aug 3. MSCI has an Earnings ESP of +2.22% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Its earnings surpassed the Zacks Consensus Estimate in all of the previous four quarters, with an average beat of 6.32%.

Today's Stocks from Zacks' Hottest Strategies

It's hard to believe, even for us at Zacks. But while the market gained +18.8% from 2016 - Q1 2017, our top stock-picking screens have returned +157.0%, +128.0%, +97.8%, +94.7%, and +90.2% respectively.

And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - Q1 2017, the composite yearly average gain for these strategies has beaten the market more than 11X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation. See Them Free>>