Samsung Electronics Co, world's biggest smartphone maker by shipments, expects to post a record operating profit of 10.1 trillion won (($9.4 billion/5.9 billion pounds) in the third quarter of this year, the South Korean firm said in guidance issued Friday.
In its pre-earnings guidance, the Korean electronics giant said its sales would come in between 58 trillion won and 60 trillion won, up by 11% to 15% from 52.18 trillion won a year earlier.
In contrast, the company's sales for Q2 2013 stood at 57trillion won, and profit at 9.5trillion won. In the third quarter of 2012 those numbers hit 52trillion won and 8.1trillion won respectively.
The company expects to earn about 10.1 trillion won on sales of 59 trillion won ($54.9 billion) in the three-month period ending in September. Wall Street analysts were expecting profits of just 9.9 trillion won. The results would represent a quarter-to-quarter increase of 6% in profits and 2.7% in sales.
Samsung's estimate represents growth of between 22.8% to 27.8% from the 8.06 trillion wonin operating profit posted a year earlier, but a slowdown from the 47.5% rise in the second quarter.
"Despite record-high earnings, doubts over the sustainability of smartphone-driven profits hint at an overall valuation discount for Samsung," Greg Roh, an analyst with HMC Investment Securities, wrote in a research note.
Samsung didn't provide reasons for its guidance. The company's financial results are scheduled for release at the end of October, when it will provide breakout figures for its four business divisions mobile, consumer electronics, chips and displays.
Samsung is the world's top maker of smartphones, memory chips and flat-panel TVs and has launched a number of eye-catching devices in the past twelve months.
Analysts estimate Samsung to have shipped between 85 million and 89 million smartphones in the third quarter. In the second quarter, Samsung had a dominant 33.1% share of the global market, while Apple trailed in second place with 13.6%, according to researcher Strategy Analytics.
"We believe that (third-quarter) earnings support our view that Samsung's smartphone business will be quite resilient despite market concerns," a team of analysts led by CW Chung at Nomura wrote to clients. The Japan-based investment bank has a "buy" rating on the stock.
Samsung's shares finished the day unchanged at 1,418,000 won ($1,324). Although Samsung's stock price has recovered somewhat from its 2013 low, some analysts don't expect a sharp rebound because marketing costs and increasing sales of mid- and low-price handsets are squeezing margins at the company's core mobile business.
Samsung derives two-thirds of its operating profit from its mobile business.
Samsung and Apple Inc. AAPL -1.27% have a virtual duopoly in the high-end smartphone market, but competition is rising. Several analysts have warned that with Samsung's smartphone sales showing signs of plateauing. The company faces challenge of meeting rising demands for shareholder-friendly actions, such as increasing its dividend or making its shares more easily accessible to U.S. investors.
Mark Newman, a Hong Kong-based analyst with Sanford C. Bernstein, in a report to clients last week, blamed the weakness in Samsung's share price on "inadequate cash return," especially as growth slows and as Samsung's cash hoard rises to about $50 billion.
"Growth is slowing and cash is accumulating," Newman said in an interview. "This is getting more and more important for investors."
The company is expected to face pressure from shareholders to unleash its cash pile as saturation in the smartphone market threatens a slowdown in earnings growth for it.
In a bid to revive enthusiasm for mobile gadgets, Samsung in September unveiled its much-awaited smartwatch, the Galaxy Gear, and it also plans to introduce a phone with a curved screen. Analysts, however, expect those devices to remain niche products for this year, unlikely to contribute much to the company's mobile earnings.
Original headline: Samsung expects record $9.4bn operating profit in Q3
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