Two Clear Positives From Qualcomm's Earnings, as Stock Rises

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Qualcomm's (QCOM) - Get Reportfourth-quarter earnings report was strong and investors responded in kind, but one negative was concerning to a top analyst. 

The stock rose 6.6% to $90.24 in after-hours trading Wednesday. 

Before we dive into the particulars, let's review the earnings first. 

Qualcomm said non-GAAP earnings for the three months ended in September, its fiscal fourth quarter, were 78 cents a share, down 12% from the year-earlier quarter but ahead of Wall Street estimates of 71 cents. 

Here are two clear positives. 

Positive 1

Qualcomm's tech-licensing segment beat expectations, as revenue came in at $1.15 billion, topping estimates of $1.1 billion.

While the company's largest segment, CDMA tech, also beat revenue expectations ($3.61 billion v. expected $3.57 billion), the tech-licensing segment carries far fatter operating margins, which are usually at 60% or more. CDMA-tech margins are narrower than 20%. And it was the tech-licensing revenue that beat expectations by 4.5%, while QCT revenue beat by only 1%. The company's consolidated operating margin was therefore 22.9%, beating estimates of 22.5%. 

Management was quick to mention on the first page of the earnings print that QCOM "delivered a strong quarter, with non-GAAP earnings per share above the high end of our guidance range, primarily on solid performance in our [tech-licensing] segment." 

Positive 2

Earnings per share guidance for the first quarter of fiscal 2020 was a range between 80 cents and 90 cents, with the midpoint of 85 cents higher than analysts' expectation of 81 cents. 

1 Negative 

Revenue guidance was nothing to write home about. 

Management is looking for revenue for the current quarter of $4.4 billion to $5.2 billion, with the midpoint at $4.8 billion. Analysts are looking for $4.82 billion. 

While the revenue-guidance miss was slight, Alliance Bernstein analyst Stacy Rasgon wasn't thrilled about it. 

"Guidance was so bad last quarter that it makes modeling challenging, and faith in the forward trajectory requires a significant amount of trust in management," Rasgon wrote in a pre-earnings note out Tuesday. 

As for the rest, analysts will be sure to parse management's commentary around Huawei and Apple (AAPL) - Get Report revenue, which did not go into heavy detail, but detail nonetheless.

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