Samsung Electronics’ profits in Q3 lackluster

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Samsung Electronics’ profits in Q3 lackluster

Samsung Electronics is forecast to post modest profits for the third quarter, as sales of the company’s flagship smartphones failed to drive significant sales.

Analysts continued to lower their earnings estimates for the tech giant prior to Samsung’s earnings outlook set for early October, according to data compiled by the market tracker FnGuide.

Samsung is expected to record 6.61 trillion won ($5.63 billion) in operating profit for the July-September period, a 6.4 percent decrease from the estimated figure two months ago.

The latest earnings projection as of Sept. 17 was conducted by 22 brokerage houses, while the earlier outlook was the average of estimates by 24 firms as of July 17.

The third and fourth quarters are generally considered good times seasonally for handset makers to rake in huge profits, though the third quarter estimate is lower than Samsung’s second-quarter profit of 6.9 trillion won.

The latest market consensus went on to predict that the largest smartphone maker by shipment will make 50.18 trillion won in revenue for the third quarter.

Samsung’s Galaxy S6 and S6 Edge were released in April to positive critical reviews and hopes for super sales. But a series of data indicated that sales of the Galaxy S6 series fell short of expectations.

Apple is taking away high-end consumers, while Chinese manufacturers Huawei and Xiaomi and other smaller vendors are grabbing mid- and low-range consumers.

To address poor sales, Samsung Electronics has lowered the release prices for its flagship lineups while embarking earlier on price cuts for its older models.

The prospect increases the possibility that Samsung may not hit its yearly sales target of at least 200 trillion won. In the past three years, Samsung has not missed that target, though the market consensus compiled by FnGuide forecasts 199.16 trillion won for this year. Yearly profit is estimated to be 26.18 trillion won.

Of the 22 brokerage houses polled, only 10 firms gave out estimates over 200 trillion won. Some analysts warned that the performance in the handset division is not the sole issue.

Yuanta Securities turned in the lowest estimate of 6.31 trillion won.

“Operating profit in the mobile division is expected to stay below the previous expectation of 2.8 trillion won, which is down by 12 percent,” said Lee Jae-yoon, a researcher at Yuanta Securities Korea. “Although the total number of smartphones sold during the period may appear to grow, it doesn’t necessarily translate into profit growth since sales in the smartphone division was driven by mostly low-priced budget phones.”

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]
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