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Samsung Estimated Strong Profit Growth in First Quarter

April 8
7:37 AM 2016

Samsung Electronics reported a strong growth in its first quarter profit, as its smartphone business has recovered. Its earning guidance estimated a higher profit than analysts estimated.

Samsung announced on Thursday that it expected a 10% jump in quarterly profit as its Galaxy 7 flagship product showed a robust sales. The company also gained benefit from improved performance on its mid-to-low tier devices and cost-cutting efforts.

Strong sales of Galaxy S7 which was unveiled on March 11 was reported by Chosun Ilbo. The smartphone has achieved a 2.5 times better sales than the previous version, the Galaxy S6. As a result, Samsung Electronics achieved an estimated operating profit of more than W6 trillion ($5.7 billion). This quarterly result marked the fourth consecutive quarter Samsung posted operating profit in a $5 billion range.

The Korean electronic giant posted an operating profit above the analyst expectations, which predicted to be around W5.6 trillion ($5.3 billion). The number, derived from a survey of 23 analysts, was tipped by a Thomson Reuters StarMine SmartEstimate. Many brokerages have increased their prediction on Samsung profit this quarter, following the better than expected sales of its Galaxy S7 products.

Anticipating its competitors, Samsung had decided to launch its new Galaxy S7 earlier than its previous versions. This has proved to be effective in bringing forward more sales.

Samsung boasted that its new Galaxy S7 have the most improvement. The smartphone is equipped with an improved camera, waterproofing and microSD storage support. Analysts said that Samsung mobile business may probably be the top earner for the first time in seven quarters with its Galaxy S7 series.

Following the higher operating profit guidance than any individual forecast in the survey, CNBC reported that Samsung's shares opened by 1.2% higher after the guidance. The shares were last up by 0.7%, outperforming a 0.4% gain for the broader market.

However, as competitors also prepare to launch their products, investors are quite wary. Apple has recently launched its iPhone SE and a strong Chinese newcomer, Huawei Technologies, that prepared its new P9 flagship phone.

Both company will pose a strong competition for Samsung Galaxy S7. Regarding the upcoming product competitors, HMC Investment analyst, Greg Roh, commented on Samsung first quarter profit, "First quarter earnings will be the peak this year."

Reuters reported that investors learned from last year, when Galaxy S6 phone was boasted to have a major design change, turned out to perform worse than expected in sales. Fund manager at Alpha Asset Management C.J. Heo said, "S7 sales popped in the beginning but could very well fade as rivals launch new models. We have learned from the past."

The Korean electronic giant predicted a strong growth in its quarterly profit following a successful sales of its Galaxy 7 flagship product. However, as its competitors also prepare to launch new product, analysts expected a strong competition for Samsung.

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