April 7, 2015 / 12:11 AM / 5 years ago

Samsung Electronics first-quarter profit flags budding recovery ahead of key launch

SEOUL (Reuters) - Samsung Electronics Co Ltd expects January-March profit to be its highest in three quarters, beating expectations and suggesting that the tech giant is on track for an earnings recovery ahead of the launch of new flagship smartphones.

A worker works on a Samsung outdoor advertisement installed atop an office building in central Seoul March 23, 2015. REUTERS/Kim Hong-Ji

Operating profit likely reached 5.9 trillion won ($5.44 billion) in the first quarter, the South Korean manufacturer said on Tuesday, versus the 5.3 trillion won average estimate of 41 analysts in a Thomson Reuters I/B/E/S survey.

This was also better than 5.3 trillion won reported for October-December even though the first quarter tends to be a seasonally weaker period as the industry comes off the year-end peak. Samsung typically releases final first-quarter figures towards the end of April.

“These results are meaningful and will lead to very strong earnings expectations for the second quarter,” HMC Investment analyst Greg Roh said.

Shares of Samsung were up 0.4 percent as of 0100 GMT Tuesday, following the earnings guidance, versus a 0.3 percent gain in the broader market.

Investors and analysts expect the Galaxy S6 and S6 edge models - on sale from Friday - to revive handset sales and propel profits in coming quarters. Researcher Counterpoint expects Samsung to sell more than 50 million units of the new devices to consumers this year - a new record for the company.

The mean estimate from a Thomson Reuters I/B/E/S survey of 40 analysts tips a 6.7 trillion won April-June profit, improving sequentially for the third consecutive quarter. The contribution from Samsung’s chip-making division is also tipped to be just as significant as smartphone-related income.

Chips likely out-earned phones for a third straight quarter in January-March, analysts said, as Samsung dominates in memory and grew market share for system chips. Samsung opted to use more of its own chips for its Galaxy S6 models and added chip maker Nvidia Corp as a new contract manufacturing client.

The smartphone business likely also saw sequential shipments growth in the first quarter as new mid-tier handsets such as the Galaxy A and E models went on sale in major markets, analysts said.

For all of 2015, profit is likely to rise 6 percent to 26.5 trillion won, according to a Thomson Reuters I/B/E/S survey of 51 analysts. Improving sales particularly in system chips and favorable pre-sale reviews for the S6 have helped reverse the estimate from a profit decline forecast earlier this year.

Additional reporting by Sohee Kim; Editing by Christopher Cushing and Stephen Coates

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