Trends That Likely Drove Samsung’s Record Fourth Quarter

by Trefis Team
Samsung Electronics
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Samsung Electronics (OTC:SSNLF) published its earnings guidance for Q4 2017, projecting record profits for the fourth quarter, driven by growth at the company’s display and memory segments. However, the company’s projections fell short of market estimates in terms of both revenues and earnings, likely due to the impact of a strong Korean Won. Samsung expects operating income of 15.1 trillion won ($14.2 billion) marking a year over year increase of 64%, while revenues are projected to come in at 66 trillion won ($62 billion), translating into an increase of about 24% year-over-year. Although Samsung is only expected to break down segment information when it publishes its full earnings later this month, below we take a look at some of the trends that could have influenced the company’s earnings.

Trefis has a $2,025 price estimate for Samsung, which is slightly below the current market price.

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Components Likely Drove Growth, But Currency Headwinds Likely Hurt The Company

Samsung’s semiconductor business was likely responsible for a bulk of the growth over Q4. While the pricing for DRAM is likely to remain robust, amid strong demand and continued supply shortages, the NAND market could be transitioning away from a phase of undersupply as new 3D NAND capacity comes online, reducing pricing gains for Samsung, which is the largest NAND vendor. Samsung’s display business is also likely to see growth, driven by OLED screen orders from Apple for its flagship iPhone X. Margins on the supply agreement are also expected to be thick, as Samsung is reported to charge Apple over $100 per display. That said, South Korea’s surging currency is likely to have proved a dampener for Samsung’s earnings. The Korean won was up by about 7% versus the U.S. dollar in the fourth quarter, approaching 3-year highs. This is creating headwinds for Samsung, which is largely export-oriented. Moreover, Samsung’s contracts with key customers are believed to be fixed in US dollars and the company needs to bear the impact of currency headwinds.

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