Samsung Earnings Forecast beats expectations

Samsung forecasts that their profits will increase by 48% in this first quarter of 2017. This is despite their top executives getting involved in a political scandal involving corruption and technical issues with their Galaxy Note 7 that forced them to withdraw it from the market.

Samsung executives were charged with bribery and embezzlement. Vice Chairman Lee Jae-Yong could face at least five years in prison if proven guilty.

Samsung is forecasting a first-quarter operating profit of 9.9 trillion won ($8.8 billion). This tops a survey done by Thomson Reuters of 18 analysts. The average forecast was 9.4 trillion won.

Samsung also sees a 0.4 percent growth in revenue for this quarter. This would yield a total of 50 trillion won of income which is still ahead of forecasts by analysts.
Greg Roh, HMC Investment Securities analyst, said, “This is better than expected.”

Lee Min-hee, Heungkuk Securities analyst, said, “The semiconductor business was likely the main driver for earnings.” She adds that profitability was also boosted by the solid sales of Samsung’s mid-to-low tier smartphones.

IBK Asset Management fund manager Kim Hyun Su, said, “Samsung will look to recover market share they lost last year and pump volumes even if they have to spend more to do so.”

Wall Street and investors are expecting Samsung to hit its best-ever quarterly profit this 2nd quarter of the year because of the debut of the Galaxy S8 smartphone on April 21. S8 features the largest screens to date for Samsung high-end smartphones.

This will be Samsung’s first premium device launch since last October when Note 7 was withdrawn from the market. Bryan Ma, vice president for devices research at IDC, said, “The initial indications for the Galaxy S8 are rather positive. Assuming that a Note7-like catastrophe doesn’t rear its ugly head again, Samsung’s phone sales should have the potential to add what is already a booming components business in the quarters ahead.”

20% of South Korea’s GDP is driven by Samsung’s sales. Many young Korean graduates aspire to join Samsung after passing the rigor of South Korea education system.

The first quarter is typically a slow season for smartphones and televisions. However, strong demand for mobile chips and smartphones displays buoyed their profits.

Analysts expect that Samsung’s semiconductor division to have done better than expected because memory chips supply remain tight while demand from global smartphone makers remained strong. The semiconductor division is likely to create more than 50% of Samsung’s quarterly income. Analysts are expecting the division to record sales of 5.8 trillion won for the first quarter.

Samsung’s share price continued to rise despite all the corporate drama. Overall, South Korea’s stock market has been performing well. Foreign flows into the stock market have totaled $3 billion. For the quarter, Samsung stock has been up 14%.

Samsung is the global leader in smartphones and display panels. According to analysts, Samsung will continue to benefit from strong global demand for NAND flash chips which are used for long-term data storage.

Samsung will elaborate more on its first quarter performance later this month.

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