Samsung Electronics Co Ltd is likely to forecast its best quarterly profit in nearly three years on Friday, analysts said, with robust memory chip sales easing the pain of the costly failure of a flagship smartphone.
Samsung Electronics Co Ltd is likely to forecast its best quarterly profit in nearly three years on Friday, analysts said, with robust memory chip sales easing the pain of the costly failure of a flagship smartphone. The South Korean firm discontinued sales of the Galaxy Note 7 phones after some of the devices caught fire, warning of a $2.1 billion hit to its profit in the fourth quarter of 2016 due to expenses tied to an ongoing global recall and lost sales.
But investors are betting a surge in sales of memory chips and organic light-emitting diode screens for smartphones will translate to strong earnings growth for the October-December period and through 2017.
Samsung’s operating profit likely rose for a second straight quarter to 8.4 trillion won ($7 billion) over October-December, according to a Thomson Reuters StarMine SmartEstimate derived from a survey of 15 analysts, up 37 percent from a year ago and the highest since the first quarter of 2014.
You may also like to watch this:
“We look for the memory business to post a big earnings improvement and contribute 50 percent of its (Samsung’s) total operating profit for Q416,” Daiwa said in a report.
Memory chip prices have spiked recently on demand for more firepower on mobile devices. But it is the sales of the higher-end 3D NAND chips which have rallied significantly, helping Samsung rake in profits given it is ahead of its rivals such as Toshiba Corp and SK Hynix in the mass production of these chips, analysts said.
Samsung’s semiconductor profit likely surged to a record 4.5 trillion won for the fourth quarter and 13.1 trillion won for 2016, Eugene Investment said in a report, adding chip earnings will grow further this year on firm demand.
HDC Asset Management’s fund manager Park Jung-hoon agreed that the components business outlook appeared “pretty solid”.
“We’ll have to see how the mobile business does … but I think Samsung’s operating profit should be able to come in somewhere around mid-30 trillion won range (this year).”
For the recently ended quarter, Samsung’s mobile earnings likely rebounded from the dismal third quarter on healthy sales of the Galaxy S7 and S7 edge smartphones, analysts said.
Hyundai Securities expects Samsung’s mobile division’s operating profit at 2.2 trillion won, in line with a year earlier and up sharply from 99 billion won in July-September.
The company’s shares hit a record 1.831 million won on Tuesday this week ahead of the earnings forecast on Friday.
They surged 43 percent in 2016 – the most since 2012 – suggesting investors did not expect a serious business impact from Samsung’s name being dragged into a growing political scandal in the country.
($1 = 1,206.1500 won)