Samsung Q4 Earnings Preview

Samsung Q4 Earnings Preview
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BMO Capital Markets analysts Tim Long, Ambrish Srivastava, Ari Klein and Gabriel Ho rate Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930) as Outperform as the Korean tech giant is set to announce 4Q13 results tonight.

Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930) is expected to report 4Q13 results tonight, with a conference call at 7:30 p.m. ET. Our 2013/2014 EPS estimates of KRW 194.73k / KRW 200.05k are unchanged.

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Samsung’s earnings Impact and analysis

We expect results to be in line with the recent pre-announcement and model handset shipments of 120 million units, with sequentially stagnant smartphone volumes and slightly lower ASP as the mid-range remains strong. We believe 4Q was a really difficult setup, and expect a rebound in the first half of 2014.

Samsung’s valuation and recommendation

Our price target of KRW 1,500,000 for Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930) assumes the stock trades at 7.5x our 2014 EPS estimate. We rate Samsung shares Outperform.

We lowered our estimates following the pre-announcement. We believe much of the impact came from underperformance in the Display Panel segment, as well as from currency, with slight downside to Mobile. We currently estimate total handset shipments of 120 million units for the quarter, with smartphones accounting for 88 million, or 73% of shipments. We believe Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930)’s handset ASP may have slipped 1% sequentially, as strong Note 3 sales were offset by flagging Galaxy S4 volumes. We also updated our 2014 shipment estimates to 483 million handsets, of which 382 million, or 79%, are smartphones. We model 2014 handset ASP to grow 4%, thanks to improving mix, with smartphone ASP slipping 5%.

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