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Analysts divided on Samsung's Q2 after earnings surprise

All Headlines 11:33 April 08, 2016

By Kang Yoon-seung

SEOUL, April 8 (Yonhap) -- South Korean analysts were divided over Samsung Electronics Co.'s second-quarter earnings, industry data showed Friday, after the firm delivered a report saying its first quarter earnings may beat the forecast for the January-March period, apparently on the back of improved smartphone sales.

On Thursday, Samsung said it is believed to have posted an operating profit of 6.6 trillion won (US$5.6 billion) in the January-March period, up 10.37 percent from the same period last year. From the previous quarter, the Q1 estimate marks a 7.49-percent rise.

The estimated earnings hovered far above the market consensus of 5.6 trillion won that came from 22 South Korean brokerage houses, according to data compiled by Yonhap Infomax, the financial arm of Yonhap News Agency.

Analysts agreed that the performance can be considered an earnings surprise, adding the mobile segment probably boasted improved sales. The sales of the Galaxy S7 series around the globe is estimated at 10 million units, beating the previous expectations of 7 million, they added.

Local analysts suggested an operating profit of between 5.8 trillion won to 6.8 trillion won in their reports released on Friday. Samsung posted an operating profit of 6.89 trillion won in the second quarter of 2015.

Some analysts expect the robust performance may lose steam over the next three months on slowed sales of the flagship smartphones.

"The profitability of the IT and Mobile division is expected to lose ground if Samsung expands marketing expenditures on slowed sales of the Galaxy S7," said Noh Geun-chang, an analyst at HMC Investment Securities Co., adding the chip segment will also see challenges as rivals struggle to narrow the technology gap with Samsung Electronics.

Samsung's smaller rival LG Electronics Inc. also started sales of its own flagship smartphone, the G5 at end-March, emerging as another potential threat for the Galaxy S7 series.

The appreciation of the South Korean won against the greenback is also considered one of the possible hurdles for Samsung in the second quarter.

"Currently, the South Korean won lost ground against the U.S. dollar compared to the January-February period," said Lee Seung-woo, an analyst at IBK Investment & Securities Co., hinting that the company may not enjoy the same foreign-exchange gain as it did in the first quarter.

Analysts said Samsung's operating profit can rise up to 800 billion won for every 100-won-level depreciation of the local currency against the greenback. The South Korean won closed at 1,172.5 won against the U.S. dollar at end-2015, but the figure reached 1,241 won as of end-February.

Other analysts, on the other hand, said Samsung Electronics may continue to post a robust performance in the second quarter.

"We have to focus on the fact that Samsung Electronics recovered its competitiveness in the smartphone segment," said Lee Jeong, an analyst at Eugene Investment & Securities Co. "The Galaxy S7 and other budget models will continue to support the IT and Mobile segment."

Lee, however, added that Samsung will still face challenges from foreign-exchange fluctuations and the increase of marketing costs.

Hwang Joon-ho, an analyst at KDB Daewoo Securities Co., added Samsung may enjoy sound performances in the second quarter on the improved seasonal demand for mobile devices and consumer electronics.

Samsung Electronics is set to release its final first-quarter earnings report around the end of this month.

colin@yna.co.kr
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