Samsung Share Price: Q2 Earnings Guidance Misses Analysts’ Estimate

on Jul 5, 2013
Listen, Friday, July 5th: Samsung Electronics Co (KRX:005930) issued a second-quarter earnings guidance on Friday that missed analysts’ expectations as sales of its flagship Galaxy SIV handset slowed down.

Impacted by the worse-than-expected earnings guidance, the Samsung share price closed 3.8 percent lower at KRW 1,267,000.00 in Seoul today. The stock has lost 17 percent since early June as a result of a series of downgrades by brokers. The drop in the share price reflects worries about handset margins at the company, in which mobile business creates 70 percent of total profit.

**Sales growth slowing**
Samsung’s preliminary earnings estimate released ahead of full quarterly results due on July 26 indicated a rise in operating profit and sales. Samsung’s 9.5 trillion won ($8.3 billion) operating profit forecast was up 47 percent from the second quarter of 2012. Still, that figure trailed the 10.16-trillion won average of 43 analysts surveyed by Thomson Reuters. Sales guidance indicated approximately 57 trillion won in the second quarter, up from the 47.6 trillion won a year earlier, but behind analysts’ average projection of 58.6 trillion won, according to Bloomberg.

Investors were mostly disappointed by slowing growth in handset sales, which Samsung estimated at four percent in the second quarter, half of what it had been in the corresponding period a year earlier. The slowdown comes despite the release of Samsung’s latest flagship smartphone, the Galaxy S IV. The South Korean tech giant unveiled the handset at a Broadway-style launch event in New York in March in a bid to win back from Apple its top position on the US smartphone market.

“I think Samsung spent more on marketing expenses than expected because of the launch of Galaxy SIV smartphone, which led the company’s results to miss the market consensus,” HMC Investment Securities analyst Nho Geun-Chang said, as quoted by Reuters.
**Wearable computers**
!m[Investors worried by slowing sales growth](/uploads/story/3708/thumbs/pic1_inline.jpg)

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“Is Samsung’s smartphone story now over? Not quite yet. Its growth is indeed slowing due largely to disappointing sales of the SIV,” opined Jung Sang-jin, a fund manager at Dongbu Asset Management, as quoted by Reuters. Yet, he said he believed that the South Korean company “has some exciting stuff up its sleeves”, although he made it clear that “the problem is no one is sure whether these products can really wow investors and consumers”.
A possible area of growth for Samsung could be the sector of wearable computing devices. Apple Inc., the maker of iPhone and iPad, has recently filed for a trademark for “iWatch” in Japan, signalling that it may be moving ahead with plans to offer a watch-like device that will perform some functions of smartphones. Samsung has also filed for a trademark for “Samsung Gear” in the US for a range of wearable devices.
**The Samsung share price closed at KRW 1,267,000.00 in Seoul on 05.07.2013**

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