Happy Easter- QCOM 1QFY06 earnings April 19- prep / some thoughts
1. Consensus Estimates
Consensus (Yahoo/ First Call) guidance for FY06 has moved up to $1.56 in the past week, $0.11 above the Q’ official estimate of $1.45. The last five revisions appear to be 2 @ $1.67, 2 @ $1.58, and 1 @ $1.53. Since the Q has not officially revised their FY06 number as yet, my guess is that we will see an upward revision on Wednesday.
2. WCDMA handset growth
From my records, the average (7 analysts) CY2006 WCDMA handset sales estimate is 98M units, with the highest being 105M and the lowest 97M. The Q still uses 86M as their CY06 estimate. It would also appear appropriate for the Q to increase its CY06 WCDMA estimate. An increase of 10 M units to 96M could potentially increase QTL revenue by $0.08.
WCDMA handset 10M
WCDMA Handset ASP $375/ unit (Thelander est)
WCDMA Handset Sales $3,750M
QTL royalty @ 5.5% $ 206M
EBT @ Net Margin @90% $ 185M
EAT @ 27% Tax rate $ 135M
Shares Out 1,702M
EPS increase $0.079
3. Handset ASPs also appear to be running above original projections for the first two quarters, with the Q1 actual @ $215 (guidance $206), and Q2s revised guidance @ $209 (orig @$207).
4. Given the above, it appears that the Q can potentially increase its FY06 EPS guidance by $0.11, matching the consensus number of $1.56 (33% increase over FY05- $1.17).
Again, it should be noted that the two of most recent analyst FY06 EPS estimate revisions were at $1.67 (43% increase over FY05 ).
Note- This is with FY06 forecasted R&D increases of ~25%, while some major players in mobile wireless are significantly reducing R&D.
5. New dual mode Korean handset
As a added bonus, Korea will be introducing a new dual mode (CDMA + WCDMA/HSDPA) handset using two Qualcomm MSMs. Hope they sell a lot of these devices as they could potentially add a whopping $70 / unit to the Q’s revenue stream.
6. GAAP vs Proforma
It should be noted that a few articles are beginning to focus on the disparity in the analysts estimates as some analysts are starting to use GAAP (with ESO expense) EPS extimates. Apparently, the analyst community has latitude to choose whether to use proforma or GAAP figures. As such, the consensus estimates will become less meaningful as they will be apples to bananas comparisons. Not only will this impact the EPS estimates within each company, but comparisons amongst all companies. This will result in PEs and PEGs and all metrics involving EPS valuation being inconsistent throughout the industry.
One would have thought the “analyst” community (First Call/ Thompsons/ Reuters) would have come to a understanding as to which set of numbers to use for EPS estimating purposes, rather than what appears to be an inconsistent application of GAAP / proforma.
FWIW, for consistency it would be my recommendation to continue to use proforma estimates at least through CY2006. If GAAP (with ESO expense) then becomes the norm for 2007, at least there will be a basis for comparisons with 2006 GAAP (with ESO expense) can be made). As it now stands, 2006 GAAP (with ESO expense) comparisons with 2005 GAAP (without ESO expense) are meaningless.
Hopefully the following table will post correctly.
QCOM GUIDANCE ANALYST ACTUAL O/U
------------------- CONSENSUS Q ORIG GUIDE
3/07 4/19
........ORIG CURR NEW
------------------- -------- ------ --------------
EPS
..EXCL QSI
...Q1 $0.37 $0.38 $0.39 +$0.02 + 5.4%
...Q2 $0.36 $0.40 $0.40 _____ +$0.04 +11.1%
...Q3 ____ $0.37
...Q4
..TOT FY$1.45 $1.45 ____ $1.56
..GAAP
...Q1 $0.32 $0.36 +$0.035 +10.1
...Q2 $0.29 $0.34 _____ +$0.045 +15.1%
...Q3 ____
...Q4
..TOT FY$1.21 $1.21 ____
HANDSET SALES
...Q1 52 52 52
...Q2 60 67 ______
...Q3 ____
...Q4
..TOT FY 262 262 ____
...WCDMA 84 84 ____
...CDMA 178 178 ____
HANDSET ASP
...Q1 $206 $215
...Q2 $207 $209 ______
...Q3 _____
...Q4
..TOT FY$210 $210 _____
MSM SHIPMENTS
...Q1 47 47 47
...Q2 45 47.5 ______
...Q3 _____
...Q4
...TOT FY
AI
