QUALCOMM, Inc. (NASDAQ:QCOM), a leading developer and innovator of advanced wireless technologies, products and services, today announced results for its fiscal first quarter ended December 27, 2015.
“We delivered a stronger than expected quarter with earnings per share above the high end of our initial estimates, driven by better than expected 3G/4G reported device sales and benefits realized from cost actions across the Company,” said Steve Mollenkopf, CEO of Qualcomm Incorporated. “We signed several new license agreements in China and are on track with our cost reduction initiatives. Design traction for our new Snapdragon 820 processor continues to be strong, and we expect improving trends in our chipset business in the second half of fiscal 2016.”
Non-GAAP results exclude the QSI (Qualcomm Strategic Initiatives) segment and certain share-based compensation, acquisition-related items, tax items and other items. Other items excluded from NonGAAP results include third-party acq
uisition and integration services costs and certain other items, which may include major restructuring and restructuring-related costs, goodwill and indefinite- and long-lived asset impairment charges and litigation settlements and/or damages. Detailed reconciliations between GAAP and Non-GAAP results are included within this news release.
Cash and Marketable Securities
Our cash, cash equivalents and marketable securities totaled $30.6 billion at the end of the first quarter of fiscal 2016, compared to $31.6 billion a year ago and $30.9 billion at the end of the fourth quarter of fiscal 2015.
Recently Announced Joint Venture Agreement with TDK
In January 2016, we announced an agreement with TDK Corporation to form a joint venture to enable delivery of radio frequency front-end (RFFE) modules and RF filters into fully integrated products for mobile devices and Internet of Things (IoT) applications, among others. The joint venture will initially be owned 51% by Qualcomm and 49% by TDK. The purchase price upon close of the transaction is $1.2 billion, to be adjusted for working capital, outstanding indebtedness and certain capital expenditures, among other things. Additionally, we have the option to acquire (and TDK has an option to sell) TDK’s interest in the joint venture for $1.15 billion 30 months after the closing date. The transaction is subject to regulatory approvals and other closing conditions and is expected to close by early 2017.
Return of Capital to Stockholders
The following table summarizes stock repurchases and dividends paid during the first quarter of fiscal 2016 (in millions, except per-share amounts):
In the first quarter of fiscal 2016, we completed our previously announced commitment to repurchase $10 billion of stock from March 2015 through March 2016. On January 12, 2016, we announced a cash dividend of $0.48 per share payable on March 23, 2016 to stockholders of record as of the close of business on March 2, 2016.
Effective Income Tax Rates
Our fiscal 2016 annual effective income tax rates are estimated to be approximately 17 percent for GAAP and approximately 18 percent for Non-GAAP. The effective income tax rates for the first quarter of fiscal 2016 were 13 percent for GAAP and 17 percent for Non-GAAP. As a result of the retroactive reinstatement of the federal R&D tax credit during the first quarter of fiscal 2016, a tax benefit related to fiscal 2015 of $0.05 per share was excluded from Non-GAAP results.
The following statements are forward looking, and actual results may differ materially. The “Note Regarding Forward-Looking Statements” in this news release provides a description of certain risks that we face, and our most recent quarterly report on file with the Securities and Exchange Commission (SEC) provides a more complete description of risks.
Our outlook does not include provisions for future asset impairments or for pending legal matters, other than future legal amounts that are probable and estimable. Further, due to their nature, certain income and expense items, such as realized investment and certain derivative gains or losses, cannot be accurately forecast. Accordingly, we only include such items in our financial outlook to the extent they are reasonably certain; however, actual results may differ materially from the outlook. Our outlook includes an estimate of the benefit related to stock repurchases that we plan to complete.
We have not included any estimates related to the proposed joint venture with TDK Corporation in our fiscal 2016 outlook. The joint venture is expected to close by early 2017. We expect the joint venture to be accretive to Non-GAAP earnings per share in the 12 months following the transaction close.
The following table summarizes GAAP and Non-GAAP guidance based on the current outlook. The NonGAAP outlook presented below is consistent with the presentation of Non-GAAP results included elsewhere herein. (Original Source)
Shares of Qualcomm are down 1.5% to $47.53 in after-hours trading. QCOM has a 1-year high of $74.09 and a 1-year low of $44.39. The stock’s 50-day moving average is $48.02 and its 200-day moving average is $54.46.
On the ratings front, Qualcomm has been the subject of a number of recent research reports. In a report released yesterday, Nomura analyst Romit Shah reiterated a Hold rating on QCOM, with a price target of $55, which implies an upside of 15.7% from current levels. Separately, on January 22, Northland Securities’ Tom Sepenzis upgraded the stock to Buy and has a price target of $62.50.
According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Romit Shah and Tom Sepenzis have a total average return of 6.9% and 5.5% respectively. Shah has a success rate of 54.8% and is ranked #324 out of 3607 analysts, while Sepenzis has a success rate of 34.6% and is ranked #694.
The street is mostly Bullish on QCOM stock. Out of 18 analysts who cover the stock, 13 suggest a Buy rating and 5 recommend to Hold the stock. The 12-month average price target assigned to the stock is $61.32, which implies an upside of 29.0% from current levels.
Qualcomm Inc develops digital communication technology called CDMA (Code Division Multiple Access), & owns intellectual property applicable to products that implement any version of CDMA including patents, patent applications & trade secrets.