Samsung estimates its 3Q operating profit surged 80 percent

A recent weakening of the won – down 12% year-on-year against the dollar by the end of the third quarter – helped boost profits as most sales of semiconductors and display panels to emerging markets are settled in USA dollars, he added. According to Morgan Stanley, these profits were driven largely by a premium product mix, extensive cost control measures and currency gains. With $55 billion in cash, the company may be poised to offer consolation. Shares surged the most in more than six years as a revamped smartphone lineup and a renewed focus on components gains traction.

Nearly after two years of disappointing sales and slowing profit, Samsung Electronics announced that it expects its third-quarter operating profit to be much higher than the same period a year earlier. Samsung launched a pair of new smartphone models-the Galaxy Note 5 and the Galaxy S6 Edge +-in August, advancing the timing of its launch by several weeks to beat Apple Inc.in the market.

The increase in profits for the third quarter is a respite from declines it experienced for the past few quarters.

To get a sense of scale, compare Samsung’s semiconductor operations with Intel. Samsung makes more in monetary terms when sales of chips and screens are translated back into Korean won. It also reduced price for Galaxy S6 as its sales fell short of expectations. The company also obtained a contract to supply chips for Apple.

According to Nomura analyst CW Chung, the company’s smartphone business is declining due to commoditization and rivalry.

South Korean market analysts believe it will be a few time yet before Samsung can begin turning its smartphone business around with their estimates putting a significant return to profits in the division sometime after 2017. According to Bloomberg, the expected earnings from the business is about 3.5 trillion won or $3.0 billion, which is a 54 percent increase.

On September 21 we posted a report titled “Things Look Gloomy Again for Samsung as Korean Analysts Cut Q3 Estimates”.

Samsung revealed the headline figure before it releases detailed numbers at the end of October.

The overall sell-side is now bullish on Samsung shares. The 12-month consensus price target for shares is ₩1282.52, reflecting a 46.57% upside potential over the stock’s previous close. Diwali would be the flawless time, but coming quarter of course. “But the latest earnings have proved component sales are strong enough to elevate its market valuation”, Park said.