In a recent note, BMO analysts Tim Long, Alex Spektor and Ari Klein rate Qualcomm as Outperform ahead of their earnings call today.

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Qualcomm earnings

QUALCOMM, Inc. (NASDAQ:QCOM) reports today after the close with a call to follow at 4:45 p.m. Our FY2014/2015 pro forma EPS estimates for QUALCOMM, Inc. (NASDAQ:QCOM) are unchanged at $5.05/$5.70, mixed with consensus of $5.08/$5.61, though the reports so far imply slight downside.

Impact & Analysis

Neutral/Negative. Two of the largest licensees remaining, Apple Inc. (NASDAQ:AAPL) and LG Electronics Inc. (KRX:066570), both reported December-quarter earnings. LGE beat our TRDS estimate, and AAPL is basically in line thanks to a big jump in ASPs. Apple iPhone results were mixed. Shipments underperformed at 51.0 million versus our 55.0 million (provided by Keith Bachman, BMO Research’s Hardware Analyst), while we estimate ASP beat by 10%. However, we also estimate a higher iPhone gross margin, which results in a lower TRDS benefit. iPad shipments were solid, at 26.0 million vs. our 25.0 million estimate. At the midpoint, we now estimate December TRDS for Apple Inc. (NASDAQ:AAPL) at $20.6 billion, about flat with our prior estimate. LG smartphone shipments were in line with our prior estimates at 13.2 million, while upside to ASP raises December TRDS by $250 million. Our TRDS estimate for the December quarter is $72.3 billion. Coupled with last week’s misses from Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930) and Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V), the new results bring the December number to about $71.3 billion, with approximately 85% of TRDS having been reported. This would imply about $0.01-$0.02 of EPS downside to our March-quarter estimate of $1.27 (consensus $1.26) for QUALCOMM, Inc. (NASDAQ:QCOM). March TRDS (and June EPS) could see similar downside. We are making no changes to our model at this time.

Valuation & Recommendation

Our price target of $77 assumes QUALCOMM, Inc. (NASDAQ:QCOM) stock trades to a P/E of 15x our FY2014 estimate. We rate QCOM shares Outperform.