Samsung Electronics Co. Ltd (LON:BC94) (KSE:005930) released an earnings forecast of 9.5 trillion won ($8.5 billion) operating profit for the three months period from April to June, ahead of its scheduled quarterly financial report on July 26.

Samsung

The earnings guidance of the South Korean electronics manufacturer was up by 47 percent, however it was lower than 10.16 trillion won expectations of 43 analysts based on a surveyed by Thomson Reuters I/B/E/S.

Wall Street Expectations For Samsung

Wall Street analysts expect Samsung Electronics Co. Ltd (LON:BC94) (KSE:005930) to report a higher operating profit this quarter and in the fourth quarter because its new Galaxy S4 smartphone recorded a good sales performance and new products are now available in the market.

The report from Reuters quoted Lei Sei-chul, analyst at Meritz Securities opinion regarding the earnings guidance of the company. According to Lee, “The slowdown in its handset business appears to be worse than expected and the disappointing result simply re-endorses the market view that Samsung’s smartphone growth momentum is slowing.”

On the other hand, Lee noted that the component side of the business and the new handset product line ups of Samsung Electronics Co. Ltd (LON:BC94) (KSE:005930) demonstrate solid improvements. The analysts believe that the company’s profit will grow again this quarter.

Meanwhile, analysts at Jefferies Equity Research said that although the South Korean Electronics manufacturer’s earnings guidance missed the expectations of Wall Street analysts, it still represents a strong operating profit.

Investment Debate To Shift To Semiconductors

Sundeep Bajikar and Mark Lipacis emphasized that the guidance was consistent with their Moore Stress thesis as the smartphone industry slows down. They believe that the investment debate for Samsung Electronics Co. Ltd (LON:BC94) (KSE:005930) will shift to semiconductors, which will serve a key driver of its revenue and operating profit.

“We continue to believe that Samsung’s unique advantages in memory and foundry are being overlooked by investors anchoring on shipments of smartphones,” said Bajikar and Lipacis in a note to investors.

The analysts noted that Samsung Electronics Co. Ltd (LON:BC94) (KSE:005930) gained profit share in the smartphone industry from 2008 through 1Q 2013. They believe that the company’s next leg of operating profit expansion will come from gains market share in the high-end smartphone from Apple Inc (NASDAQ:AAPL) particularly in the United States.

Sundeep and Lipacis further stated, “Recent stock weakness and our investor conversations suggest Samsung’s intrinsic ability to grow profits through unique capabilities in semiconductors is misunderstood. We expect semiconductor OP to grow at a faster pace than mobile OP.”

The analysts recommended a buy rating for the shares of Samsung Electronic Co. Ltd (LON:BC94) (KSE:0035930).