'Another Surprise?' Eyes on Samsung Electronics' Q4 Earnings

[Asia Economy Reporter Kim Hyewon] Samsung Electronics has already drawn attention to its fourth-quarter performance after delivering a third-quarter earnings surprise that significantly exceeded market expectations.

According to financial information firm FnGuide on the 11th, since Samsung Electronics announced its preliminary third-quarter results on the 8th, domestic securities firms have estimated fourth-quarter operating profit forecasts ranging from the low 9 trillion won level to the 12 trillion won level.

Samsung Electronics' third-quarter operating profit was preliminarily tallied at 12.3 trillion won, with sales of 66 trillion won. This marks the first time in seven quarters since the fourth quarter of 2018 (10.8 trillion won) that quarterly operating profit has exceeded 10 trillion won. It is also the highest since the third quarter of the same year (17.57 trillion won).

Fourth-quarter operating profit forecast at 9 to 12 trillion won... Display division expects Apple peak season effect

At this point, the securities industry's outlook on Samsung Electronics' fourth-quarter performance is generally optimistic.

Hi Investment & Securities projected that, assuming no special bonuses are paid to employees, the fourth-quarter operating profit will be similar to the third quarter at around 12.3 trillion won. Researcher Song Myungseop of Hi Investment & Securities said, "Semiconductors will see operating profit decline to about 4.6 trillion won due to shipment stagnation and price drops, and the IT & Mobile (IM) division will experience profit margin decreases due to reduced smartphone shipments and a lower proportion of high-end phones. However, the Consumer Electronics (CE) division will see increased shipments during its peak season, and Harman's profitability trend will solidify." He also forecasted that the display division's operating profit in the fourth quarter will reach about 1.9 trillion won, nearly a 250% increase from the previous quarter due to concentrated shipments.

Next, Samsung Securities projected a fourth-quarter operating profit of 11.13 trillion won and sales of 62.27 trillion won. Researcher Hwang Minseong of Samsung Securities said, "Depreciation expenses will increase with the start of Pyeongtaek Phase 2 in semiconductors, and in communications, the effect of new Note product sales will diminish while peak season marketing costs will inevitably rise. CE is also expected to see seasonal cost increases at year-end. However, the display division is operating at full capacity due to Apple's peak season effect, so a significant performance improvement compared to the third quarter is expected."

NH Investment & Securities forecasted fourth-quarter operating profit at 11 trillion won, sales at 64.8 trillion won, and an operating margin of 17%. By business segment, operating profit estimates were 5.1 trillion won for semiconductors, 1.4 trillion won for displays, 3.5 trillion won for IM, and 1.1 trillion won for CE. Researcher Do Hyunwoo of NH Investment & Securities said, "Although the IM division's performance will be somewhat sluggish due to the smartphone off-season, the display division's performance will improve thanks to new smartphone launches by major clients." He added, "The memory market outlook appears to be able to improve significantly starting from the first quarter of next year." He further noted, "Recently, demand for game consoles and notebook PCs has been strong, reviving memory supply and demand, and smartphone manufacturers are increasing memory orders to fill Huawei's void. Data center companies have also resumed considering memory purchases."

On the 8th, Samsung Electronics announced that its consolidated operating profit for the third quarter of this year was preliminarily estimated at 12.3 trillion won, an increase of 58.1% compared to the same period last year. The photo shows the Samsung Electronics headquarters in Seocho-gu, Seoul. Sales increased by 6.45% to 66 trillion won compared to the same period last year. Photo by Hyunmin Kim kimhyun81@

Cape Investment & Securities projected a fourth-quarter operating profit of 10.6 trillion won and sales of 62.5 trillion won, diagnosing that while the semiconductor market is bottoming out, signs of improvement such as resumed purchases by server customers are emerging. Analyst Park Seongsun of Cape Investment & Securities said, "Set demand is expected to remain solid in the fourth quarter, but in IM, marketing costs will increase due to the launch of 5G iPhones and intensified competition with Chinese VOX companies aiming to fill Huawei's gap," forecasting lower profitability compared to the third quarter.

Kiwoom Securities forecasted operating profit of 10.3 trillion won and sales of 65.5 trillion won. They expect strong performance in the display division due to client new product launches but anticipate weak results in IM and semiconductors. Researcher Park Yuak of Kiwoom Securities said, "The IM division will record operating profit of 3.4 trillion won due to competitors' new product launches and increased marketing costs to cope with the year-end off-season. The semiconductor division is also expected to remain in the 4 trillion won range due to a base effect from strong sales last quarter and product price declines." He projected the display division's operating profit to increase 116% from the previous quarter to 1.5 trillion won.

Hanwha Investment & Securities initially forecasted fourth-quarter operating profit at 10.2 trillion won but now believes it will be decided between that and the third quarter's 12.3 trillion won. Analyst Lee Sunhak of Hanwha Investment & Securities said, "The semiconductor division is expected to see decreased performance due to weak server DRAM prices, and the IM division's smartphone sales volume will drop more than 10% compared to the previous quarter due to seasonal factors. However, the display division is expected to benefit from peak season effects as OLED shipments to North American clients maximize."

Daishin Securities provided the most conservative estimate with a fourth-quarter operating profit of 9.4 trillion won. By business segment, semiconductors at 4 trillion won, displays at 1.3 trillion won, IM at 3 trillion won, and home appliances at 1 trillion won. Researcher Lee Subin of Daishin Securities said, "The display division will improve profits due to entering the OLED panel peak season, LCD deficit improvement, and increased panel shipments for iPhones. The CE division will increase sales volume but see a decline in operating margin."

Experts say "Special shareholder returns in Q4 are worth expecting"

Meritz Securities projected 10.9 trillion won but left room for upward revision. They believe cost reduction effects in the set division can continue until year-end, and there is potential for improvement in memory shipment volume and prices, along with the possibility of strong Apple iPhone sales. Researcher Kim Sunwoo of Meritz Securities said, "Samsung Electronics' fourth-quarter results are likely to exceed expectations, which directly relates to special shareholder returns. Currently, 9.4 trillion won is estimated to be paid as special shareholder returns, but since results have exceeded expectations, the scale could expand further."

KB Securities estimated operating profit of 10.1 trillion won, supported by improved display performance, and highlighted the possibility of additional shareholder returns. Analyst Kim Dongwon of KB Securities said, "We expect share buybacks or increased cash dividends by the end of October this year. Considering performance improvements over the past three years, residual funds are expected to arise, making it a good time to anticipate additional shareholder returns."

Samsung Electronics announced in 2017 that after paying 50% of the three-year free cash flow (FCF) as dividends, any remaining funds would be used for share buybacks and cancellations or additional cash dividends. The end of this three-year shareholder return policy is approaching at the end of this month.

This content was produced with the assistance of AI translation services.