Samsung Electronics set for first-quarter profit jump, but some call an earnings peak

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Source:   —  April 07, 2016, at 10:17 AM

The S Korean tech giant'south estimate for first-quarter operating profit handily beat market forecasts and has boosted hopes that its struggling mobile business will post its first annual profit gain in three years, also benefiting from an improved performance for mid-to-low tier devices and cost-cutting efforts.

Samsung Electronics Co Limited flagged a ten % leap in quarterly profit on Thursday - a sign of strong early sales for its new Galaxy S7 smartphones although doubts abound whether momentum can be maintained in the face of new rival offerings.

The S Korean tech giant'south estimate for first-quarter operating profit handily beat market forecasts and has boosted hopes that its struggling mobile business will post its first annual profit gain in three years, also benefiting from an improved performance for mid-to-low tier devices and cost-cutting efforts.

Samsung said January-March operating profit was likely 6.6 trillion won ($5.7 billion), well over the 5.6 trillion won profit tipped by a Thomson Reuters StarMine SmartEstimate derived from a survey of twenty-three analysts.

The firm won't disclose a full breakdown of its results until late April, and gave number comment on the performance of its business divisions.

More than a dozen brokerages had lifted forecasts for Samsung earnings since late March encouraged by reports of better-than-expected sales of its Galaxy S7 models, which boast an improved camera, waterproofing and microSD storage support. Samsung'south mobile business was probably the top earner for the first time in seven quarters, analysts say.

A decline in the cost of the S Korean won is also expected to assistance lift the firm'south first-quarter bottom line.

But even so, contest from new products such as Apple Inc'south recently launched iPhone SE and Huawei Technologies Co Ltd'south [HWT. UL] upcoming flagship P9 phone are tempering investor enthusiasm.

"First quarter earnings will be the peak this year," said HMC Investment analyst Greg Roh, adding that marketing costs for the mobile business will rise in the following quarter, pushing profits lower.

Investor caution stems from latest year'south launch of Galaxy S6 phones, which boasted major design changes and features and were widely praised. Initially expected to be Samsung'south best-selling phones ever, sales fizzled following the launch.

"S7 sales popped in the beginning but could very well wither as rivals launch new models," said Alpha Asset Management fund manager C. J. Heo. "We've learned from the past."

Other analysts said Samsung'south decision to launch the Galaxy S7 models a mo earlier than their predecessors may have simply have brought forward sales that'd have been made in later quarters.

Samsung'south shares gave up early gains to be down 1.6 % in midday trade, compared with a 0.2 % fall for the broader market

(Reporting by Se Youthful Lee; Editing by Stephen Coates and Edwina Gibbs)

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