Analysts warn of earnings decline at Samsung Electronics

[Photo by Kim Ho-young]

Analysts have drastically cut their Samsung Electronics earnings expectations for the fourth quarter of this year, warning that the current semiconductor winter will continue through the first half of next year.

IBK Investment & Securities said in an investor note on Wednesday that Samsung Electronics’ fourth-quarter operating profit would decrease by 44.1 percent from the third quarter to 6.06 trillion won ($4.73 billion), adding that the company’s earnings decline in semiconductor business would continue through the first half of next year.

Inventory levels are still high, and it is too early to expect a recovery in demand, said Kim Woon-ho, an IBK Investment & Securities analyst. It is difficult to expect a rebound in DRAM prices, but the pace of decline in the average selling price will slow down in the third quarter of next year, he added.

Earlier, Goldman Sachs lowered its forecast for Samsung’s fourth quarter operating profit by 25.6 percent from its previous projection (7.8 trillion won) to 5.8 trillion won, which was down 58.3 percent from a year ago, and about half of the third quarter’s 10.85 trillion won. In particular, the investment bank cut the expected operating profit for the company’s semiconductor division by 42.3 percent from 2.6 trillion won to 1.5 trillion won. This is a sharp decline of 83 percent compared to the same period last year (8.8 trillion won).

Eugene Investment & Securities followed suit, predicting that Samsung Electronics’ operating profit would decrease by 53 percent on year to 6.5 trillion won for the fourth quarter this year and by 44 percent to 25.5 trillion won for the full next year.

DAOL Investment & Securities released a grimmer outlook, forecasting the operating profit for the fourth quarter would reach 6.06 trillion won, lower than market consensus, and 26.8 trillion won for next year, down 26.6 percent from its previous estimate.