Samsung Galaxy S7, S7 Edge Sales Expected To Drive Company To Best Quarter In 2 Years

Samsung Electronics Co Ltd, which is set to disclose its estimates for second-quarter earnings Thursday, is likely to issue guidance for its best quarterly profit in the last two years. Two of the company’s flagship devices that are expected to boost Samsung’s profit are the recently released Galaxy S7 and Galaxy S7 Edge smartphones.

According to a Thomson Reuters survey of 16 analysts, the South Korean tech giant is expected to report operating profit of 7.8 trillion won ($6.8 billion) in the April-June period. If turns out to be accurate, it will be the highest since an 8.5 trillion won ($7.3 billion) profit in the first quarter of 2014. The survey also suggested that mobile division could be responsible for a 4.3 trillion won profit ($3.7 billion), or 54 percent of Samsung’s second quarter profit.

“Galaxy S7 sales are better than expected in the first half, and the semiconductor business is also outperforming rivals,” Reuters quoted KTB Asset Management's Lee Jin-woo as saying, adding that the company would also report strong operating profit in both the third and fourth quarters of this year at between 7 trillion won ($6 billion) and 8 trillion won ($7 billion) in each.

Local securities companies are also hopeful that the world’s top smartphone manufacturer will report forecast-beating earnings for the second quarter of 2016. Seoul-based Hi Investment & Securities Co. reportedly said in a note to clients that Samsung’s second-quarter operating income would soar by 21 percent from a year earlier to 8.1 trillion won ($7 billion).

Samsung’s smartphone business has been facing increased competition from Apple Inc at the high end of the market, and from smaller Chinese rivals like Huawei Technologies in the low-cost segment of the global smartphone market. But many believe that robust sales of Galaxy S7 and Galaxy S7 Edge would propel the company to record its first annual profit growth in three years.

“While operating profit margins for the mobile phone business will decline in the third and fourth quarters as the Galaxy S7 effect fades, operating profit will continue to grow on an annual basis,” Korea Investment & Securities said in a report obtained by Reuters.

Some analysts estimate that Samsung shipped about 15 million units of Galaxy S7 and Galaxy S7 Edge in the April-June period. In the January-March period, the company sold 81.18 million smartphone units around the world, boosted by the early release of the Galaxy S7 series.

During the announcement of its fourth-quarter 2015 profit earlier this year, Samsung warned that a recovery in sales would be slow amid intensifying competition and weakening global demand for consumer electronics. The company, however, said that it expected business conditions to improve toward the second half of the year.