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Samsung Electronics Q3 guidance tops analyst estimates

Thursday, 3 Oct 2013 | 7:56 PM ET
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Samsung Electronics estimated its July-September earnings rose 25 percent to a record $9.4 billion as a strong recovery in memory chip prices helped counter a slowdown in the South Korean company's smartphone business.

The maker of the Galaxy S4 said its third-quarter operating profit likely increased to 10.1 trillion won ($9.4 billion). The guidance, released ahead of full quarterly results due out by Oct. 25, was better than the average forecast of 9.96 trillion won in a poll of 34 analysts by Thomson Reuters I/B/E/S.

The South Korean firm estimated its third-quarter sales rose to 59 trillion won, versus a market forecast of 60 trillion won.

(Read more: Cramer: 'Curtain has closed' on Samsung smartwatch)

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Samsung, which has reported record earnings every quarter since 2012 except the first three months of 2013, is expected to post another round of record earnings in the current quarter as chip prices extend their gains.

The global memory chip market has rallied since late 2012 due to a supply crunch caused by years of cautious investment to support prices, and conversion of factory capacity to produce more profitable chips used in smartphones and tablets.

(Read more: Samsung ups ante against Apple with curved screens)

The semiconductor market further tightened after a fire in early September at a China plant owned by the world's no.2 memory chipmaker SK Hynix.

"The semiconductor and mobile divisions may have performed better than expected in the third quarter, helping Samsung post better-than-expected earnings," said Choi Do-yeon, an analyst at Kyobo Securities.

"We expect earnings to improve to 10.7 trillion won in the current quarter, as computer memory chip prices are rising thanks to the fire at the Hynix plant."

(Read more: Samsung Galaxy S4: A Revealing Look at Search Data)

Samsung's mobile devices business, which accounts for around two-thirds of the company's total profit, is struggling with weakening growth as the high-end segment of the smartphone market saturates, pushing sales of its flagship Galaxy S4 lower.

Analysts estimate S4 sales dropped to around 16 million sets in the third quarter from some 20 million in the two months following the smartphone's late April launch.

Profits at the mobile division may face further pressure in the current quarter as the company increases marketing expenses in the run-up to the year-end holiday shopping season, analysts say.

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