Samsung Electronics Q1 Operating Profit Expected To Top Estimates With 10% Rise

Samsung Electronics announced Thursday that it expects a better-than-expected jump in operating profit in the first quarter of 2016. The South Korean electronics giant, which debuted its flagship Galaxy S7 smartphones last month, estimates that its operating income for the three-month period ending March 31 rose to 6.6 trillion won ($5.7 billion) — a 10 percent jump over the same period last year and higher than the 5.6 billion won forecast by Reuters.

Samsung’s net sales in the quarter rose 4 percent over the year-earlier period to approximately 49 trillion won — largely in line with expectations. The company, which will report its final earnings later this month, did not disclose its net profit in the preliminary numbers released Thursday.

The Korean company, whose profits have, since mid-2014, been squeezed by its American rival Apple, had reported an operating profit of 6.1 trillion won in the fourth quarter of 2015 — a 15 percent year-on-year rise — and revenue of 53.3 trillion won — a 1.1 percent rise over the year-ago period.

At the time, the company also said it was “expecting challenges in 2016 to maintain earnings due to a difficult business environment and slowing IT demand.”

According to analysts cited by Bloomberg and the Associated Press, the company’s surprise performance in the first quarter of 2016 can largely be attributed to better-than-expected sales of its Galaxy S7 smartphones. On Wednesday, estimates of the smartphone’s sale during its first month in the market were raised to 9 million from 7 million.

“The biggest reason for the sharply improved profitability is largely due to much lower marketing spending for the mobile business,” Yoo Eui Hyung, an analyst at Dongbu Securities in Seoul, told Bloomberg. “The big disparity between the earlier profit estimates and the latest revisions stems entirely from the mobile business. The faster release surely helped but it’s dubious whether the S7 can continue to surprise the market in the longer run.”