Samsung Forecasts Record Q4 Profit, but Misses Expectations

Samsung Electronics Co Ltd forecasted a record 4th-quarter profit amid strong demand for its memory chips and smartphone components, but the estimate missed analyst expectations.

The electronics giant said that it expects to record an operating profit of 15.1 trillion won ($14.1 billion) for the 3-month period that ended on December 31, a 63% year-over-year increase. However, the projection fell short of analyst expectations of an average forecast of 15.9 trillion won.

“I think the miss, in my opinion, is primarily driven by smartphones,” said Mehdi Hosseini, senior analyst and senior VP of semiconductors at Susquehanna Financial Group. “I still think that the semiconductor, driven by memory, and display, driven by OLED displays, did really well.”

Analysts said that the strong won and an end-year bonus for staff in the semiconductor business are expected to have dented 4th-quarter profit by around 400 billion won and 400-500 billion won respectively.

“The currency effect and bonuses appear to be the main reason for missing market forecasts, but smartphone shipments are also likely to be lower than expected,” said Song Myung-sup, analyst at HI Investment & Securities.

Overall, it was a good quarter for Samsung despite missing out on analysts’ targets, said Holger Mueller, principal analyst and VP at Constellation Research Inc.

“Yes, they missed targets but not by much,” said Mueller. “Samsung is sitting pretty in its double role as smartphone provider and components supplier. This is a remarkable sign of its resilience and core business strength.”

Its 4th-quarter revenue was likely 66 trillion won, which was slightly less than analyst expectations of 66.8 trillion won, according to Samsung.

For the year of 2017, Samsung’s operating income was at 53.6 trillion won ($50.2 billion), which rose 83% from 2016. It sales was at 239.6 trillion won ($224.2 billion), jumped 19% from the previous year.

The profits were driven by a recovered mobile division, but were boosted mostly from its semiconductor business. The demand has been especially strong in China from smartphone vendors.

Analysts said that the continued rise in the price of DRAM chips and demand from data center server drove 4th-quarter earnings, offsetting a drop in NAND chip prices and the stronger won.

However, the outlook for semiconductor in 2018 is mixed, as Samsung shares have declined 11.4% from their all-time high in November.

Samsung shares dropped 3.11%, most likely due to lingering doubts over the company’s business outlook. The broader Kospi index closed down 0.12%.

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