Samsung Reports Solid Earnings Ahead of Galaxy S5 Launch

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Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930)’s earnings results were in line with what analysts had been expecting for the March quarter. Of course that didn’t yet include results from sales of the newly launched Galaxy S5.

Breaking down Samsung’s earnings results

Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930) reported total revenue of KRW 53.7 trillion, a 2% year over year increase. Operating income was KRW 8.5 trillion, while operating margin was 15.8%. The Korean electronics giant’s profitability did improve from the previous quarter’s 14% margin.

In a report dated April 29, 2014, BMO Capital Markets analyst Tim Long and his team said Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930)’s Mobile segment results were mostly in line with their expectations. However, there was some upside to the company’s average smartphone selling price. Sales in the IT and mobile communications segment were KRW 32.4 trillion, which was just ahead of their estimate at KRW 31.8 trillion. The mobile sub-segment recorded sales of KRW 31.4 trillion, again, ahead of their estimate at KRW 30.9 trillion.

The company’s semiconductor segment was a bit lower than their expectations, coming in at KRW 9.39 trillion, a 10% sequential decline. Their estimate was KRW 9.57 trillion, an 8% decline sequentially. The company’s operating margin of 20.8% for that segment was meaningfully ahead of their estimate at 17.4%.

Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930)’s consumer and displays segment recorded sales of KRW 11.3 trillion, a little shy of BMO’s estimate of KRW 11.8 trillion.

BMO reiterates Samsung rating

The BMO Capital team reiterated their Outperform rating and KRW 1.5 million price target on Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930) and saw they see this latest earnings report as being neutral for the company. They note that the corporate numbers were about in line with the first press release, although each of the segments had mixed results. Volumes for the mobile segment were in line at 113 million handsets. In the semis segment, the analysts say the miss was mostly because of “lower-than-modeled applications processor shipments.”

Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930) spent KRW 5.4 trillion in capital expenditures during the first quarter, including KRW 3.3 trillion in the semiconductor segment. The company again didn’t provide full-year guidance and just reiterated that levels would be similar to last year’s level.

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