Samsung expected to report 6th straight quarterly earnings decline
Q1 2025 forecast: 5.3 trillion won operating profit (-38% YoY)
Full year 2025 profit forecast: 26.5 trillion won (up from 25 trillion in 2024)
Stock performance:
Q1: +8.6%
Previous quarter: +12.1%
Reached 21-month high in March
Galaxy S6 expected to ship 44 million units vs S5's 38 million
Semiconductor business showing strong performance
Opinion
Despite continued quarterly earnings decline, market sentiment appears increasingly optimistic about Samsung's recovery prospects. The combination of strong semiconductor performance and potential mobile division turnaround with Galaxy S6 presents a compelling case. However, the significant gap between current earnings and 2013's peak suggests a modest rather than dramatic recovery. The market's enthusiasm might be getting ahead of actual business performance.
Core Sell Point
Samsung's expected transition from six quarters of decline to modest growth reflects a convergence of positive factors in both semiconductor and mobile divisions, though recovery to peak earnings remains distant.
Tech giant Samsung Electronics Co Ltd <005930.KS> likely saw January-March earnings slip for the sixth straight quarter, but investors are betting on a rebound this year on healthy chip sales and high hopes for its new flagship smartphones. Shares in South Korea-based Samsung hit a more-than 21 month high in mid-March as brokerages raised profit forecasts and target prices on its improving business outlook. The stock rose 8.6 percent in January-March following a 12.1 percent gain in the previous period. Investors believe the Galaxy S6 and its curved-edges variant will sell briskly when they roll out this month following positive reviews, and analysts say new mid-tier phones will boost sales, adding to expectations that the earnings slide in its handset business is ending. The recovery is also expected to be backed by strong semiconductor sales. In addition to healthy memory chip demand, Samsung's system chips business is seen returning to profit this year. Its home-grown Exynos processor will power the new Galaxy phones, and Samsung recently added Nvidia Corp as a contract manufacturing client. "This is a year of recovery for Samsung," said fund manager Park Sung-jae at LS Asset Management, which holds Samsung shares. "The stock price reflects that sentiment." To be sure, recovery is expected to be gradual and well shy of record profits in 2013. The median forecast from a Thomson Reuters I/B/E/S survey of 41 analysts tips first-quarter operating profit at 5.3 trillion won ($4.82 billion), down 38 percent from 8.5 trillion won a year earlier as mobile earnings weakened. The company will release its first-quarter earnings guidance on Tuesday. But analysts say the underlying figures should show meaningful improvements, with momentum to pick up further once the Galaxy S6 and S6 edge roll out globally. BNP Paribas analyst Peter Yu expects Samsung to ship 44 million of the new phones this year, compared with an estimated 38 million units of the disappointing Galaxy S5 last year. For the whole year, a Thomson Reuters I/B/E/S survey of 51 analysts expects profits to rise to 26.5 trillion won from 25 trillion won in 2014 - a reversal from the prevailing consensus early this year for another earnings slide. "We believe Samsung's smartphone operations are in a full recovery phase," Yu said in a note to clients last week, adding that there was an earnings upside of up to $1.5 billion to his 2015 profit forecast of 28.1 trillion won because of the new flagship devices. (Editing by Tony Munroe and Stephen Coates)
