Qualcomm (QCOM) Stock Gains on Accelerated Buyback Announcement

NEW YORK (TheStreet) -- Shares of Qualcomm (QCOM) were gaining 2.1% to $70.74 on heavy trading volume Thursday after the chipmaker announced a new accelerated buyback program.

Qualcomm said It will repurchase an aggregate of $5 billion shares of common stock for an initial delivery about 57.7 million shares as part of the repurchase plan. The company plans to use proceeds from its recent $10 billion debt offering to fund the accelerated buyback.

"These repurchases represent a significant step towards meeting our goal of repurchasing $10 billion of common stock by March 2016, in addition to our commitment to return a minimum of 75% of free cash flow to stockholders through dividends and repurchases," CEO Steve Mollenkopf said. "The board and the management team remain committed to returning capital to stockholders and believe we can continue to do so as we invest to create longer term stockholder value."

About 12.7 million shares of Qualcomm were traded by 11:30 a.m. Thursday, above the company's average trading volume of about 11.4 million shares.

TheStreet Ratings team rates QUALCOMM INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate QUALCOMM INC (QCOM) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity and expanding profit margins. We feel its strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • QCOM's revenue growth has slightly outpaced the industry average of 2.8%. Since the same quarter one year prior, revenues slightly increased by 8.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • QCOM's debt-to-equity ratio is very low at 0.03 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 2.86, which clearly demonstrates the ability to cover short-term cash needs.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Communications Equipment industry and the overall market, QUALCOMM INC's return on equity exceeds that of both the industry average and the S&P 500.
  • The gross profit margin for QUALCOMM INC is rather high; currently it is at 67.17%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 15.27% trails the industry average.
  • QUALCOMM INC's earnings per share declined by 44.7% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, QUALCOMM INC increased its bottom line by earning $4.40 versus $3.91 in the prior year. This year, the market expects an improvement in earnings ($4.79 versus $4.40).
  • You can view the full analysis from the report here: QCOM Ratings Report

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