Apple Battle Weighs on Qualcomm Revenues, Earnings, Outlook

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Qualcomm Inc. (NASDAQ: QCOM) reported third fiscal quarter 2017 results after markets closed on Wednesday. The chipmaker posted adjusted diluted earnings per share (EPS) of $0.83 and adjusted revenues of $5.3 billion. In the third quarter of 2016, Qualcomm reported EPS of $1.16 on revenues of $6 billion. The consensus analysts’ estimates called for EPS of $0.81 and $5.26 billion in revenue.

On a GAAP basis Qualcomm reported EPS of $0.58, including the company’s strategic initiatives segment and some share-based compensation, items related to acquisitions, tax and other items. Adjusted net income totaled $1.2 billion compared with $900 million in GAAP net income.

The company said that third-quarter results were negatively affected as a result of actions taken by Apple’s contract manufacturers, who did not fully report and did not pay royalties due on sales of Apple products, as well as the previously disclosed dispute with another licensee, who did not report or pay royalties due in the quarter. Qualcomm expects these licensees to continue to take such actions in the future until the respective disputes are resolved.

Steve Mollenkopf, the company’s CEO, commented:

We delivered better than expected results in our semiconductor business this quarter, which drove EPS above the midpoint of our expectations versus our April updated guidance. … We believe that we hold the high ground with regard to the dispute with Apple, and we have initiated new actions to protect the well-established value of our technologies.

During the quarter the company returned $844 million to shareholders in the form of dividends and $300 million in share repurchases.

In its outlook for its fourth fiscal quarter, Qualcomm guided revenues in a current range of $5.4 to $6.2 billion compared with $6.2 billion actual in the fourth quarter a year ago. Adjusted EPS is forecast in a range of $0.75 to $0.85, compared with an actual total of $1.28 last year. Analysts were expecting fourth-quarter EPS of $0.90 on revenues of $5.48 billion.

Qualcomm did not provide full-year estimates, but analysts’ consensus full year estimates call for EPS of $4.24 and revenues of $22.7 billion.

The weakish guidance coupled with a modest beat for the third quarter will disappoint investors.

Shares closed at $56.78 Wednesday, up about 0.9% for the day. In the after-hours session the stock traded down about 2.6% at $55.30 in a 52-week range of $51.05 to $71.62. The consensus price target was $60.63 ahead of the report.