Can Qualcomm (QCOM) Keep the Earnings Streak Alive? - Analyst Blog

Qualcomm Incorporated QCOM is slated to release its second-quarter 2014 financial numbers after the closing bell on April 23, 2014.

In the previous quarter, the company's earnings beat the Zacks Consensus Estimate by a margin of 2.7%. Let's see how things are shaping up for this announcement.

Factors to Influence This Quarter

Qualcomm is poised to benefit from the steadily growing demand for 4G LTE-enabled mobile handsets in developed countries, rapid transition from 2G to 3G/4G in China and other emerging markets and increasing licensing revenues. The growing acceptance of LTE technology has prompted mobile handset manufacturers to develop phones that will be compatible with this network. Qualcomm has fortified its leadership position in the high-end smartphone segment.

Recently, Qualcomm announced that the “Fire TV” set-top box launched by Amazon.com Inc. runs on Qualcomm's next-generation quad-core Snapdragon 600 microprocessor. The company also revealed that it is working toward improving the performance of its high-end Snapdragon processors. Also, smartphones integrated with the latest Snapdragon 808 and 810 processors will be available from early 2015.

On the flip side, aggressive competition in the mobile phone chipset market may hurt Qualcomm's profits in the upcoming quarters. The company is facing severe competitive threat from rival Intel INTC, which has been redesigning chipsets for the mobile computing market. Intel has initiated the shipment of its first multi-mode LTE baseband modem. Competition is also likely to emanate from formidable rivals like Broadcom BRCM and Nvidia NVDA.

Earnings Whispers

Our proven model does not conclusively show that Qualcomm is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. Unfortunately, this is not the case here as elaborated below.

Zacks ESP: This is because both the Most Accurate estimate and the Zacks Consensus Estimate are poised at $1.09. This leads to an ESP of 0.00% for Qualcomm.

Zacks Rank: Qualcomm's Zacks Rank #2 (Buy) when combined with a 0.00% ESP makes surprise predictions difficult. We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

Here are some other companies to consider as our model shows these have the right combination of elements to post an earnings beat this quarter.

NVIDIA, with Earnings ESP of +6.25% and Zacks Rank #3 (Hold).

America Movil S.A.B. de C.V. AMX with Earnings ESP of +9.76% and Zacks Rank #3.