We’re hearing a touch of sour news for Samsung today, as Barron’s is reporting that Jefferies & Co. analyst Hyunwoo Doh has lowered his profit estimates for the company’s Q4 2013. This isn’t exactly the doom and gloom that some of Samsung’s competitors are probably hoping for as Doh is merely cutting his estimates for the quarter from ₩9.9 trillion to ₩9.3 trillion (a difference of about $568 million US), but it’s significant enough to be noted.
This will be somewhat surprising to a fair few people considering Samsung has consistently ranked as the top Android manufacturer thanks to the immense success of its Galaxy S and Galaxy Note lines of smartphones. Why the cut in Doh’s estimate, then? He blames his revision on “higher bonus payouts, adjustments to the company’s manufacturing of display panels, and the decline of the U.S. dollar against the Korean Won”
Samsung can’t do much about the decline of the Korean Won, and those higher bonus payouts Doh mentions amount to about ₩400 billion, so that explains where a significant portion of his estimate went. He points out that smartphone sales probably lagged somewhat for Samsung in Q4 2013, as the market has been embracing lower-end models at the expense of the high-end market. Samsung is known for its high-end devices, so it probably took a hit to sales in the quarter. Doh writes, “the IM division should see a decrease in earnings, due to slower high-end smartphone sales and inventory destocking, while the DP division should also post poor earnings, due to ASP drop and lower AMOLED capacity utilization.” However, he also wrote that Samsung’s semiconductor business should see an uptick in sales for the quarter.
Things won’t improve immediately as we head into 2014, either. Doh doesn’t expect profits to get back to normal until after Q1 2014 has wrapped up, so he’s telling investors to exercise patience as we move into the new year. All of that being said, Doh still gives Samsung’s stock a “Buy” rating, so it’s clear that he doesn’t think Samsung will be much worse for wear once its on the other side of this year-end slump. We have a feeling Samsung will just fine, and now we might have reason to believe all of those rumors of Samsung going after the low-end market.
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