Another Earnings Shock
Samsung Electronics is likely to suffer another earnings shock in the third quarter mainly due to weak demand for its new products and keen competition with rivals.
Local brokerage companies initially forecast its operating profit in Q3 this year to be in the range of 6 trillion won (US$5.8 billion), but some brokerage houses marked down their assessment to around 5 trillion won (US$4.8 billion). If the operating profit falls into the 5 trillion won range, it will mark the lowest one since the first quarter of 2012, when the company made only 5.7 trillion won (US$5.4 billion).
Not a few analysts also expected Samsung’s sales to fall below the 50 trillion won (US$48.1 billion) mark in Q3, down from over 51 trillion won (US$49.0 billion) in the previous quarter.
IBK Securities said on Sept. 12 that Samsung's third-quarter operating profits could drop to as low as 5.2 trillion won (US$5.0 billion) with sales of 49 trillion won (US$47.2 billion). BS Securities predicted sales of 49.8 trillion won (US$47.9 billion), with operating profits reaching only 5.7 trillion won (US$5.4 billion).
Such downgrades come from lower-than-expected sales of its flagship Galaxy S5 launched earlier in this year. Chinese smartphone makers like Xiaomi also have started to challenge Samsung in lower priced entry-tier smartphones particularly in their home market, while Apple has launched its new iPhone 6 and iPhone 6+ phones that eat into the large screen sector that was dominated by the Korean company.
Samsung reported operating profits of 7.2 trillion won (US$6.9 billion) in the second quarter, marking the first time in eight quarters that its profits failed to surpass the 8 trillion won (US$7.7 billion) mark. The number was viewed as an earnings shock by the market.
The drop in earnings caused Samsung Electronics stock prices, which stood at 1,295,000 won (US$1,246) when the company announced its second quarter earnings on July 8, to fall to 1,192,000 won (US$1,147) as of Sept. 11, representing an 8 percent drop in value.