South Korea's Samsung Electronics <005930.KS>, the world's top maker of memory chips and flat screen TVs, forecast second-quarter earnings well above market estimates, driving its shares up more than 4 percent on Monday.
Technology companies around the world have seen their earnings and valuations hit by the global downturn, which has prompted consumers to cut back spending on electronics goods.
Analysts said the guidance reflected Samsung's strong market position and it was too soon to say the industry was on the mend.
It looks like all key businesses -- semiconductors, LCD and mobile phones -- outperformed expectations, said Lee Min-hee, an analyst at Dongbu Securities.
We've been expecting Samsung's earnings to show a V-shape recovery in the first half, and it looks like it's a much steeper recovery.
Samsung expects to post a consolidated operating profit for April-June of 2.2 trillion-2.6 trillion won ($1.74 billion-$2.05 billion) when it reports second-quarter earnings on July 24, it said in a filing to the Korea Exchange.
Samsung said it was the first time it had provided earnings guidance and was aimed at reducing confusion ahead of results, but it did not include a breakdown of divisional performance or other details.
The guidance is very likely to translate into a parent-basis operating profit well above street forecasts of about 1 trillion won, said Dongbu's Lee.
Samsung Electronics, the largest share on the KOSPI <.KS11> and accounting for 10 percent of the main index's market cap, was up 4.2 percent at 626,000 won by 0243 GMT (10:43 p.m. EDT). It was the main factor behind the KOSPI's 0.1 percent rise, the only positive spot in a weaker Asian market.
Samsung stock rose as much as 4.7 percent at one point, its highest intraday percentage gain since early February.
Samsung ranks ahead of Japan's Sony <6758.T> in televisions and trails only Finland's Nokia in mobile phones.
A very good performance in televisions may explain the strong consolidated figures, said Peter Yu, analyst at BNP Paribas. TV margins are expected to be very high, especially in the newly launched LED televisions, Yu said, referring to the latest liquid crystal display (LCD) models using light-emitting diodes (LED) as backlights.
SCEPTICISM ON TECH REVIVAL
Analysts remained skeptical as to whether Samsung's bullish forecast signaled a recovery for the hard-hit IT industry.
It would be difficult to say Samsung's earnings guidance signals a recovery in the overall technology sector, said Park Hyun, an analyst at Prudential Investment and Securities. It would rather show Samsung's improving competitiveness.
After posting its first-ever quarterly net loss in the fourth quarter of 2008, Samsung swung back to profit in the first quarter of this year with an earnings report that suggested the worst of the slump may be over.
In May, Sony forecast it would post back-to-back yearly losses for 2008 and 2009 for the first time since listing in 1958.
Nokia, meanwhile, posted its first-ever quarterly pretax loss in the first quarter of this year and is drastically cutting annual costs at its key handset unit as it faces declining cell phone demand.
Samsung's consolidated operating profit range represents a significant jump from the previous quarter's 470 billion won, and is comparable to 2.4 trillion won profit a year ago.
On a parent basis, which excludes Samsung's numerous overseas subsidiaries, the company posted operating profit of 148 billion won in the first quarter and 1.89 trillion won in the year-ago period.
Samsung forecast second-quarter consolidated sales of 31-33 trillion won, compared with 28.7 trillion won in the first quarter and a revised 29.1 trillion won in the 2008 second quarter.
According to Reuters Estimates, Samsung is forecast to post 1.18 trillion won in second-quarter net profit. No market consensus data is available for consolidated operating profit and revenue.
(Editing by Jonathan Hopfner and Lincoln Feast)