Samsung Q1 Operating Profit Guidance Beats Estimates

Samsung Electronics 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.

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 toward 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.

Investors and analysts expect the Galaxy S6 and S6 Edge models — which go on sale 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 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.

(Reporting by Se Young Lee; Additional reporting by Sohee Kim; Editing by Christopher Cushing and Stephen Coates)

This article originally appeared on Recode.net.