Sell Qualcomm (QCOM)
You’ll pardon me, I hope, if I’m nervous heading into Qualcomm’s (QCOM) earnings announcement for the second quarter of fiscal 2010 on Wednesday, April 21. Last quarter Qualcomm shares dropped 14.3%–or $6.72 a share–on January 28, the day after the company released earnings for the first quarter of the 2010 fiscal year and announced guidance for future quarters. In its guidance Qualcomm executives predicted lower than expected revenue and earnings for the second quarter.
Since then the company has restored most of the decrease it predicted three months ago. But Qualcomm has a record of delivering earnings surprises—and the surprises aren’t always pleasant.
Update Qualcomm (QCOM)
Now I don’t wish to sound ungrateful for today’s (March 25) pop in the stock, but I do have to ask Was this trip necessary?
Today, Qualcomm (QCOM) raised its outlook for fiscal second-quarter sales and earnings.
The company said it was shipping more chipsets for CDMA cell phones than it had expected.
Update Qualcomm (QCOM)
Qualcomm (QCOM) is doing all it can to support its stock price—but the second half still depends on getting margins higher.
On March 1 the company’s board of directors voted to increase the company’s quarterly dividend by 12% to 19 cents a share from the previous 17 cents a share. The new 76 cents a share annual rate is equal to a 2.03% yield on the noon price on March 2. (The increase is effective for dividends paid after March 28.)
The board also authorized a new $3 billion share buyback program. This replaces the company’s recently expired $2 billion program. (As is typical of most share buyback programs this one wound up buying back fewer shares—about $1.7 billion—than authorized.)
The stock has popped today on the news—up about 5% as of noon—since companies typically use dividend increases to signal their confidence in the company’s future. In this case I think investors are thinking that the company is saying that it believes that its call for a second half 2010 increase in average selling prices—which would bring higher margins—is accurate.
Update Qualcomm (QCOM)
Companies have characters.
If you had a friend like Intel (INTC), for example, you know he’d be up late at night figuring out a way to make the family car run just a bit better than everyone else’s.
If you had a friend like Wal-Mart (WMT), you wouldn’t be surprised to find him out in his backyard on a Saturday building a big shed to hold all the stuff he bought cheap in bulk.
And if you had a friend like Qualcomm (QCOM), he would drive you crazy by never telling you what he was going to do until well after it happened.
I’ve owned Qualcomm off and on over the last decade and I’ve got the scars to prove it. This company just can’t seem to figure out how to tell Wall Street when enthusiasm is running too high and earnings are about to disappoint.
And that’s exactly what happened—again—when the company announced earnings for the first quarter of the 2010 fiscal year after the market close on January 27.
The problem wasn’t what the company said about earnings for the just completed quarter. Qualcomm reported earnings of 62 cents a share, 6 cents a share above Wall Street expectations.
It was the surprisingly dour guidance for the second quarter that did the damage. Second quarter revenue will be just $2.4 billion to $2.6 billion. That’s way below analyst projections of $2.75 billion.
For the entire fiscal 2010 year the company told investors to expect $2.10 to $2.30 a share in earnings (Wall Street had been looking for $2.26) and revenue of $10.4 billion to $11 billion (Wall Street had projected $11.06 billion.)
Where did that come from? The guidance left analysts and investors scratching their heads. How come a company that is clearly beating competitors, gaining market share, and rolling out impressive new products at the rate that Qualcomm is won’t turn in better results for 2010?
Technology shares leading this rally so far
Technology stocks look placed to lead the market on both technicals and earnings.
After Friday’s sell off, the sector resumed an uptrend on Tuesday January 19 that stretches back to the late November lows. Strong results from Intel (INTC) on Thursday and IBM (IBM) argue that earnings will support the strong technical upward trend. Both companies announced fourth quarter earnings that beat Wall Street estimates.
There’s one part of the technology sector that’s looking especially strong.
