Q2 Preview: Qualcomm (QCOM) + Apple (AAPL) = Profits

Qualcomm, Inc (Nasdaq: QCOM), is trading comfortably higher today, ahead of its second quarter earnings.

The stock is seeing upside as one of its major customer's, Apple (Nasdaq: AAPL), recorded a blowout quarter yesterday. Better Apple numbers = more units sold = more business for Qualcomm.

Qualcomm is expected to report earnings of 71 cents per share on revenue of $3.59 billion. Earnings would be a 17 percent drop from last quarter, but 25 percent gain from the second-quarter of 2010.

Through the quarter, shares gained about 4 percent to $56.79 at the end of June. The stock is up about 1.4 percent since then, and its trading 17 percent better on the year.

Analysts appear to be bullish on shares overall; data from Bloomberg has 37 analysts at Buy, six with a Hold rating, and none suggesting to Sell. The price target average is $67, with a low of $53 and high of $80. Qualcomm has traded in a range of $35.74 to $59.84 over the last 52-weeks.

Analyst Insight

• Goldman Sachs is looking for only modest upside given heightened expectations. Goldman is looking for earnings of 75 cents per share on revs of $3.604 billion. The firm sees shipments of 119 million chipsets, with an average selling price (ASP) of $16.95 per unit.
  
  Goldman says its sales estimate is "is driven by the royalty business, which reflects stronger March quarter handset sales (royalties are recognized one quarter in arrears). While handset demand was weaker than expected in the June quarter, we believe that will not affect Qualcomm’s chipset business; rather, it will likely impact its royalty business in Q411...the weakness at RIM and Nokia was partially offset by stronger-than-expected Android units, where we estimate Qualcomm has well over 50% chipset share."
  
  
• JPMorgan sees earnings of 71 cents per share and revs of $1.33 billion. JPMorgan is modeling for 118.3 million chipset shipments in the quarter, saying their optimism "is mainly based on FQ3 share gains by QCOM customers like HTC, ZTE, and Huawei at the expense of Nokia (NYSE: NOK). The may have been partially offset by continued success at Samsung but we generally still believe that chip volumes in FQ3 should have been solid."
  
  
• Kaufman Bros. expects earnings of 70 cents per share on revs of $3.503 billion. Commenting: "We think it is likely that the upside will come from strength in Snapdragon chipsets, due to the ramps at Sony Ericsson, HTC and others. QTL is also likely to benefit from the improved mix of smartphones as a percent of sales." Looking ahead: "we are concerned that an aggressive pricing war by some competitors will start to affect QTL's growth beginning in the December quarter (due to the quarter-in-arrears recognition of revenue). In the near term, we expect that the increasing percentage of smartphones sold will offer a near term positive for ASPs and QCOM."
  
  
• D.A. Davidson (DAD) sees earnings of 70 cents per share and revs of $3.48 billion, a little bearish to Street views. DAD is modeling for sales of 118 million chipsets with an ASP of $16.60. DA says: "We believe QCT guidance should improve as the ramp for new phones in the seasonally stronger 2H should lead to better unit volumes. Additionally, the new iPhone should also lead to better unit volumes. However, we are modeling for a 3% decline in ASP as mix could focus on more modem only chipsets (MDMs)."

Stay tuned to StreetInsider.com's EPS Insider section to see our analysis of the highly-anticipated quarterly results withi0 n seconds of their release.

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