Article / 01 July 2016 at 14:30 GMT

Earnings Watch: Samsung in the spotlight

Head of Equity Strategy / Saxo Bank
  • Next week sees Samsung, PepsiCo earnings in focus
  • Samsung poised to outperform on smartphone saturation
  • PepsiCo shares appear expensive considering sentiment
Samsung's US HQ in San Jose
We expect Samsung shares to outperform following 
next week's earnings release. Photo: iStock 

By Peter Garnry

Another off-earnings season week is starting Monday, but the coming week will nevertheless be big on releases. Samsung reports its Q2 figures on Wednesday with analysts expecting EPS at 37,309, down 13.7% from same period last year despite revenue expected to be up 4.9%.

Source: Saxo Bank, Bloomberg

Samsung shares listed in London are up 20% year-to-date and have lately accelerated on news that the mobile segment (46% of revenue in FY15) will beat estimates driven by strong sales of the new S7 Galaxy. 

Channel checks in Asia seem to indicate that demand has overwhelmed Samsung and production is behind current demand while the opposite has been the case for Apple due to their much higher price point. 

We believe the current estimated revenue growth in FY16 of 2.4% y/y is way too pessimistic and that Samsung will widely beat this negative sentiment as the smartphone market has entered its saturation phase with more focus on price than premium features.
Regular readers will know that we have a long Samsung/short Apple pair trade in our equity portfolio that is currently up 10% since inception on May 19.

Samsung weekly chart since 2011:

Create your own charts with SaxoTraderGO click here to learn more

Source: Saxo Bank 

Another interesting company reporting earnings next is PepsiCo as it will give a good insight into consumer demand in selected emerging market countries such as Mexico, Russia and Brazil. 

Revenue growth went negative (minus 5.4%) in FY15 driven by the weaker USD, but the trend was already underway. PepsiCo is suffering from the same health trend as Coca-Cola and in our opinion, investors are overpaying for PepsiCo’s stock at 22.5x forward EPS.

PepsiCo weekly chart since 2011:
Source: Saxo Bank 

The full table with information on next week’s earnings releases can be found in the attached PDF.

— Edited by Michael McKenna

Peter Garnry is head of equity strategy at Saxo Bank 
01 July
Alfa1956 Alfa1956
"can be found in the attached PDF" ??
Where, exactly?
02 July
KaranKK KaranKK
Hi Peter,
In yesterday's squawk, you mentioned about sending email on the stock portfolio.
How can we enroll on your mailing list ?
15 July
Peter Garnry Peter Garnry
You have to call your account manager. @Alfa1956 the editors have forgot to attach the PDF. The email sent directly to clients contained the PDF. Sorry for the inconvience.


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