It has been about a month since the last earnings report for Qualcomm (QCOM). Shares have lost about 7.2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Qualcomm due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Qualcomm Beats Q4 Earnings Estimates on Solid Top-Line Growth
Qualcomm reported strong fourth-quarter fiscal 2024 results, with adjusted earnings and revenues beating the respective Zacks Consensus Estimate, driven by healthy demand trends in Android handsets and automotive businesses. Both metrics improved year over year, led by the strength of the business model, revenue diversification and the ability to respond proactively to the evolving market scenario.
Net Income
On a GAAP basis, net income in the September quarter nearly doubled to $2.92 billion or $2.59 per share from $1.49 billion or $1.32 per share in the prior-year quarter. The increase was attributable to top-line growth.
Quarterly non-GAAP net income came in at $3.04 billion or $2.69 per share compared with $2.28 billion or $2.02 per share in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by 13 cents.
For fiscal 2024, GAAP earnings were up from $7.23 billion or $6.42 per share to $10.14 billion or $8.97 per share, while non-GAAP earnings increased from $9.49 billion or $8.43 per share to $11.54 billion or $10.22 per share.
Revenues
On a GAAP basis, total revenues in the fiscal fourth quarter improved to $10.24 billion from $8.66 billion in the year-ago quarter. The quarterly revenues beat the consensus mark of $9.9 billion. Qualcomm registered record automotive revenues for the fifth consecutive quarter owing to solid momentum in the Snapdragon Digital Chassis platform. Strength within the handset and industrial Internet of Things (IoT) businesses also buoyed the top line.
For fiscal 2024, GAAP revenues increased to $38.96 billion from $35.82 billion in fiscal 2023.
Segment Results
Quarterly revenues from Qualcomm CDMA Technologies (QCT) were $8.68 billion, up from $7.37 billion, as strength in the automotive platform and higher demand in handsets, along with normalization of channel inventory within the IoT business, aided the top-line growth. The company witnessed solid market traction in the EDGE networking business that helps transform connectivity in cars, business enterprises, homes, smart factories, next-generation PCs, wearables and tablets.
Automotive revenues rose 68% to a record high of $899 million, driven by increased content in new vehicle launches with its Snapdragon Digital Chassis platform. This was the 16th consecutive quarter in which Qualcomm recorded double-digit growth in automotive revenues. Handset revenues jumped 12% to $6.1 billion, led by healthy traction in premium Android handsets. IoT revenues were up 22% to $1.68 billion on new product launches and channel inventory normalization. EBT margin for the QCT segment rose to 28% from 26%.
Qualcomm Technology Licensing (QTL) revenues totaled $1.52 billion, up 21% year over year, owing to strength in handset and automotive businesses. EBT margin improved to 74% from 66%.
Cash Flow & Liquidity
Qualcomm generated $12.2 billion of net cash from operating activities in fiscal 2024 compared with $11.3 billion a year ago. At fiscal-end 2024, the company had $7.85 billion in cash and cash equivalents and $13.27 billion of long-term debt compared with respective tallies of $8.45 billion and $14.48 billion in year-earlier period. The company repurchased 8 million shares for $1.3 billion during the quarter.
Q1 Guidance
For the first quarter of fiscal 2025, Qualcomm expects GAAP revenues of $10.5-$11.3 billion due to market stabilization, recovery in market demand and portfolio strength. Non-GAAP earnings are projected to be $2.85-$3.05 per share, while GAAP earnings are likely to be $2.39-$2.59 per share. Revenues from QTL are expected to be between $1.45 billion and $1.65 billion. For QCT, the company anticipates revenues between $9 billion and $9.6 billion with a mid-single-digit percentage growth in handset revenues, about a 20% rise in IoT and a 50% improvement in automotive revenues.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
The consensus estimate has shifted 6.71% due to these changes.
VGM Scores
Currently, Qualcomm has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Qualcomm has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
Qualcomm is part of the Zacks Wireless Equipment industry. Over the past month, InterDigital (IDCC), a stock from the same industry, has gained 7.7%. The company reported its results for the quarter ended September 2024 more than a month ago.
InterDigital reported revenues of $128.68 million in the last reported quarter, representing a year-over-year change of -8.2%. EPS of $1.63 for the same period compares with $2.13 a year ago.
InterDigital is expected to post earnings of $5.43 per share for the current quarter, representing a year-over-year change of +285.1%. Over the last 30 days, the Zacks Consensus Estimate has changed +3%.
InterDigital has a Zacks Rank #1 (Strong Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of A.
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