A month has gone by since the last earnings report for Qualcomm (QCOM). Shares have added about 13.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Qualcomm due for a pullback? 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 Q4 Earnings Beat on Record Revenues
Qualcomm reported solid fourth-quarter fiscal 2021 results with record non-GAAP earnings and revenues, driven by the ramp-up in 5G-enabled chips and a surge in demand for essential products and services that are the building blocks for digital transformation in the cloud economy. Both the bottom line and the top line increased year over year and surpassed the respective Zacks Consensus Estimate, backed by the strength of the business model, revenue diversification, and the ability to respond proactively to the evolving market scenario.
On a GAAP basis, net income in the September quarter declined to $2,798 million or $2.45 per share from $2,960 million or $2.58 per share in the prior-year quarter. The decrease in GAAP earnings despite top-line growth was primarily attributable to the incremental contribution from the patent agreement settlement with Huawei in fourth-quarter fiscal 2020.
Quarterly non-GAAP net income came in at $2,916 million or $2.55 per share compared with $1,669 million or $1.45 per share in the year-ago quarter. Undeterred by the supply chain adversities, the non-GAAP earnings per share were largely driven by higher revenues across the board. The bottom line exceeded management’s guidance and beat the Zacks Consensus Estimate by 29 cents.
GAAP net income in fiscal 2021 improved to $9,043 million or $7.87 per share from $5,198 million or $4.52 per share in fiscal 2020. Non-GAAP net income in fiscal 2021 more than doubled to $9,811 million or $8.54 per share from $4,816 million or $4.19 per share.
On a GAAP basis, total revenues in the fiscal fourth quarter were $9,336 million compared with $8,346 million in the prior-year quarter. The increase in revenues was driven by 5G ramp-up, chip design win momentum, RF front-end demand, and a rise in consumer electronics revenues with diligent execution of operational plans and resilient business culture acting as catalysts. In addition, the company witnessed strong momentum in IoT across consumer, edge networking, and industrial sectors along with strength in Snapdragon portfolio within the automotive sector. The GAAP revenues in the quarter exceeded the company’s guided range.
Non-GAAP revenues in the reported quarter were $9,321 million compared with $6,502 million in the year-earlier quarter. The figure beat the consensus mark of $8,877 million, driven by 5G strength, high-performing core chipsets, and new RF front-end content. In fiscal 2021, GAAP revenues were $33,566 million while non-GAAP revenues aggregated $33,467 million compared with respective tallies of $23,531 million and $21,654 million in fiscal 2020.
Quarterly revenues from Qualcomm CDMA Technologies (QCT) improved 56% year over year to $7,733 million driven by strength in handsets and higher demand in adjacent platforms beyond mobile (RF front-end, automotive, and IoT), coupled with higher chip shipments. The company is witnessing healthy traction in EDGE networking that helps to transform connectivity in cars, business enterprises, homes, smart factories, next-generation PCs, wearables, and tablets. The automotive telematics and connectivity platforms, digital cockpit and C-V2X solutions are also fueling emerging automotive industry trends such as the growth in connected vehicles, the transformation of the in-car experience, and vehicle electrification. Qualcomm believes that it is on track to become the largest smartphone RF front-end supplier by revenues as RF front-end revenues of $1,237 million increased 45% year over year. While handset revenues were up 56% to $4,686 million, automotive and IoT revenues rose 44% and 66%, respectively, to $270 million and $1,540 million. EBT margin increased to 32% from 20%.
Qualcomm Technology Licensing (QTL) revenues totaled $1,558 million, up 3% year over year, driven by higher royalty revenues from Huawei, better-than-expected global handset shipments, and a favorable OEM mix. EBT margin was 72% compared with 73% in the year-ago quarter.
Cash Flow & Liquidity
Qualcomm generated $10,536 million of net cash from operating activities in fiscal 2021 compared with $5,814 million a year ago. At fiscal 2021-end, the company had $7,116 million in cash and cash equivalents and $13,701 million of long-term debt compared with respective tallies of $6,707 million and $15,226 million in fiscal 2020. The company repurchased 5 million shares for $771 million during the quarter, bringing the tally for fiscal 2021 to 24 million shares for $3,366 million.
For the first quarter of fiscal 2022, Qualcomm expects GAAP revenues of $10-$10.8 billion. Non-GAAP earnings are projected to be $2.90-$3.10 per share while GAAP earnings are likely to be $2.53-$2.73 per share. Revenues from QTL are expected between $1.6 billion and $1.8 billion. For QCT, the company anticipates revenues between $8.4 billion and $8.9 billion.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 14.78% due to these changes.
At this time, Qualcomm has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
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.
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