Samsung Electronics first-quarter profit tipped at three-quarter high, flags momentum
SEOUL – Samsung Electronics Co Ltd expects January-March profit to be its highest in three quarters, beating market expectations and suggesting gathering earnings momentum amid firm chip sales and signs of recovery for the mobile business.
Operating profit likely reached 5.9 trillion won ($5.44 billion) in the first quarter, the South Korean manufacturer said on Tuesday, versus the 5.3 trillion won average estimate of 41 analysts in a Thomson Reuters I/B/E/S survey.
This was also better than 5.3 trillion won reported for October-December despite the fact that the first quarter tends to be a seasonally weaker period as the industry comes off the year-end peak season. Samsung typically releases final first-quarter figures towards the end of April.
“These results are meaningful and will lead to very strong earnings expectations for the second quarter,” HMC Investment analyst Greg Roh said.
The result comes after Samsung reported its first annual profit decline in three years in 2014, following a record 2013 fuelled by robust smartphone sales.
The firm is hoping a new range of flagship devices will reverse a slide in its smartphone market share to rivals like Apple Inc and Xiaomi Inc [XTC.UL] last year, which sparked criticism that management had failed to develop a new growth driver beyond handsets.
Many analysts and investors now expect the Galaxy S6 and S6 edge models – on sale from Friday – to revive handset earnings in coming quarters. The contribution from Samsung’s chip-making division is also tipped to be just as significant as smartphone revenue in the near-term.
Chips likely out-earned phones for a third straight quarter, analysts said, as Samsung dominates in memory and is expanding its market share for system chips. The division will get a boost from Samsung opting to use its own chips for its Galaxy S6 models and adding chip maker Nvidia Corp as a new contract manufacturing client.
The smartphone business, on the other hand, reported a 42 percent decline in profit last year. But new mid-tier handsets such as the Galaxy A and E models likely boosted shipments in January-March, analysts said.
Shares of Samsung were up 0.8 percent in early trade on Tuesday, following the earnings guidance, versus a 0.6 percent gain in the broader market.
For all of 2015, profit is likely to rise 6 percent to 26.5 trillion won, according to a Thomson Reuters I/B/E/S survey of 51 analysts. Improving sales particularly in system chips and favourable pre-sale reviews for the S6 have helped reverse the estimate from a profit decline forecast earlier this year. – REUTERS