Qualcomm Incorporated (QCOM) is well positioned to benefit from increased demand for 3G devices such as smartphones, tablets, and eBook readers.
The company reported Q1 EPS 10% above the Zacks Consensus Estimate, driven by a 25% surge in revenues. Management also raised its guidance for the remainder of the year, prompting analysts to revise their estimates higher. It is a Zacks #1 Rank (Strong Buy) stock.
Qualcomm also has a strong financial position with over $19 billion in cash, cash equivalents and marketable securities and no long-term debt. This has allowed the company to consistently raise its dividend since 2003. It currently yields 1.4%.
Company Description
Qualcomm manufactures and markets digital wireless telecommunications products and services. It is the inventor of CDMA (code division multiple access), a technology that has become a world standard for the wireless communications industry.
It is headquartered in San Diego, California and has a market cap of $86.3 billion.
First Quarter Results
On January 26, Qualcomm reported its results for the first quarter of 2011. Earnings per share came in at 69 cents, beating the Zacks Consensus Estimate of 63 cents. This marked the company’s fourth consecutive positive earnings surprise.
Revenue for the first quarter was $3.348 billion, also well ahead of the Zacks Consensus Estimate of $3.194 billion. It was a 25% increase over the same quarter in 2010. CDMA-based Mobile Station Modem (MSM) shipments were up 28% over the same period.
Meanwhile, operating income increased 25% year-over-year to $1.42 billion.
Increased Guidance
Management significantly raised its guidance for 2011 following strong first quarter results. The company expects to earn between $2.58 and $2.72 per share, up from previous guidance of $2.31 to $2.45.
Revenues are expected to be between $13.6 billion and $14.2 billion, representing 24% to 29% growth. This is up sharply from previous guidance of $12.4 billion to $13.0 billion.
The Zacks Consensus Estimate for 2011 is within guidance at $2.70, which equates to 31% growth over 2010 EPS. The 2012 estimate is 10% higher at $2.96 per share. The five-year consensus EPS growth rate stands at 16.8%.
QCOM is a Zacks #1 Rank (Strong Buy) stock.
Strong Financial Position
Qualcomm has an excellent balance sheet with over $19 billion in cash, cash equivalents and marketable securities. It also carries no long-term debt.
This has allowed the company to consistently raise its dividend over the last several years. In fact, Qualcomm has raised its dividend every year since 2003 and at an impressive compound annual rate of 31%.
The company also announced a 13% dividend hike on March 9. It currently yields 1.4%.
Despite a bit of a pullback in March, shares of Qualcomm are still up more than 60% since early July. Valuation is still reasonable, however, with shares trading at 19.4x forward earnings, a discount to the industry average of 20.9x. It sports a PEG ratio of 1.16.
Todd Bunton is the Growth & Income Stock Strategist for Zacks.com.
QUALCOMM INC (QCOM): Free Stock Analysis Report
Zacks Investment Research
