Report: Samsung Q1 2016 earnings to be better than expected

For the past couple of years, Samsung’s financial success has been a somewhat hit-and-miss affair. The Galaxy S5 arguably failed to live up to expectations which resulted in some reshuffling and, perhaps, the premium-material approach to the Galaxy S6. Last year was also peppered with some concern as well, culminating in the Korean conglomerate’s Vice Chairman, Kwon Oh-hyun, proclaiming that “if we resist changes then we won’t survive“. According to a new report however, 2016 looks like it will be starting with a stunning stream of success.

Thanks in part to the successful launch of the Galaxy S7 and Galaxy S7 Edge smartphones, industry analysts are now predicting Samsung to make 6 trillion won in profit, roughly $5.14 billion. Previously analysts had projected a Q1 operating profit around 4 trillion won due to increasing competition in both chip manufacturing and home appliance market.

Just last week Korean financial outlet FnGuide was anticipating this quarter’s profit to be around 5.17 trillion won as per estimates from 24 brokerage houses. For reference, in Q1 2015, Samsung earned 5.98 trillion won, thus today’s estimate is not only defying projections for the current quarter, but also posed to surpass last year’s as well.

Despite the optimistic earnings estimate, some speculators remain cautious due to lower demand often seen at the start of the calendar year.

Samsung has filed an official projected figure with Korean regulatory offices today however the guidance report is not set to be released until April 7th.

Supplemented by smartphone supply success

The new, higher projection comes amid estimated reports that Samsung has shipped a cumulative 10 million units of the Galaxy S7 and Galaxy S7 Edge in the 20 days since its release. If true, it would mean that the new smartphones are significantly more popular than their predecessors given that last year’s Galaxy S6 and Galaxy S6 Edge took almost a month longer to ship the same amount of units.

As was the case with Q3 last year, the current currency exchange rate is also playing into the projections, with the South Korean Won being weaker than the US Dollar. This in turn, means that domestic products sold in Korea have a more competitive price advantage than their overseas rivals. Today’s report also indicates that the conglomerate should also see exchange rate values favoring its semiconductor and display units as well.

Long term traction…?

While the first quarter looks poised to post positive profit, Samsung may have more difficulties as the year continues. LG, for example, is set to release its anticipated G5 flagship smartphone within mere days. The device features an all new design complete with a metal construction and swappable accessory bay. Taiwanese rival, HTC, is also planning to unveil and launch a new flagship halo product which insiders are calling the HTC10, in the next few weeks.

These two products, along with numerous new offerings by Chinese rivals and even Apple with its small yet significant iPhone SE, means that the premium market is going to become increasingly competitive as the calendar crawls on.

Looking to the summer and autumn, Samsung is expected to launch a new Galaxy Note product. Unlike last year however, which saw the simultaneous launch of not only a Note but also a larger sized Galaxy S6 Edge, this year is likely to see just one major product pushed in the same time period.

With regard to the currency exchange rate, this may become a more critical issue depending on many factors, including the progress and winners of the ongoing US Presidential Election primaries.

Wrap Up

Assuming Samsung’s official earnings guidance is in-line with, or perhaps better than today’s projections, it is safe to say the OEM has staved off what could have been a disappointing start to the year. If shipment estimates of its new smartphone hardware are accurate, it will offer a clear picture that customers are pleased with the inclusion of water resistance and a microSD support for this year’s models. Likewise, the larger size of the Galaxy S7 Edge may also offer it a competitive advantage over the standard S7; the former commands a higher price than the latter though it is also more expensive to produce.

Amid the constant rumors of Samsung bringing a foldable smartphone to market, as well as the more realistic prospects of the Galaxy Note 6, this year may indeed be a stable and significantly successful one for the world’s largest smartphone manufacturer. Adding to the potential profit picture is a new vision for the company that seeks to make its culture that of a small startup rather than a colossal corporation.