Operating profit rose to about 9.5 trillion won ($8.3 billion) in the three months ended June from 6.5 trillion won a year earlier, Suwon, South Korea-based Samsung said in preliminary earnings released Friday. That compares with the 10 trillion-won average of 34 analyst estimates compiled by Bloomberg.
The S4 was released in April with a bigger screen and motion-detecting software to help Samsung reclaim the top spot in the U.S. market from Apple Inc.'s iPhone and boost growth at its biggest source of earnings. The stock slumped 13 percent last month as at least 15 analysts cut earnings estimates amid concern the high-end smartphone market is nearing saturation.
"It sharply missed the market expectation, and that worries me," said Byun Han Joon, a Seoul-based analyst at KB Investment & Securities Co. "The market was initially concerned about the third- and fourth-quarter results, but today's news raises questions if the earnings are already in bad shape."
Byun said smartphone shipments for the quarter totaled 74 million, or 2 million less than he expected.
Sales were about 57 trillion won in the June quarter, compared with 47.6 trillion won a year earlier, the company said Friday. That compares with the 58.6 trillion-won average of 38 estimates.
Shares of Samsung, which accounts for 19 percent of the benchmark Kospi index, fell as much as 3.2 percent before trading 2.9 percent lower at 1,279,000 won as of 11:21 a.m. in Seoul. The stock has dropped 16 percent this year, compared with a 7.8 percent decline in the Kospi.
Last month, Samsung lost $25.3 billion in market capitalization, more than the value of competitor Sony Corp., as analysts scaled back expectations for the S4 and cut profit estimates.
JPMorgan Chase & Co. revised its sales estimate to 60 million units this year from 80 million, and Morgan Stanley lowered its forecast to 61 million units from 71 million, analysts led by Shawn Kim said. Samsung ships one of every four handsets in the world.
In the second quarter, the range for operating income is 9.3 trillion won to 9.7 trillion won, while sales were 56 trillion won to 58 trillion won, Samsung said. The company didn't provide net income figures or a breakdown of division earnings, and audited results are due later this month.
Operating earnings at the telecommunications unit probably rose to a record 6.9 trillion won in the quarter, according to the median estimate of six analysts surveyed by Bloomberg News. Sales may have gained 54 percent to 36 trillion won.
In the absence of a new handset from Apple so far this year, Samsung is counting on the S4 to attract high-end shoppers. The company, which unveiled the S4 at New York's Radio City Music Hall, said May 23 it sold 10 million units within the first month - about half the time it took the S3 to reach that mark. The new phone features a 5-inch screen and 13-megapixel camera.
"I had expected Samsung's profit to be sustained due to its multiple products across all price points in smartphones," said Lee Seung Woo, a Seoul-based analyst at IBK Securities Co. "The latest results sharply missed the consensus, and I may have to revise the third-quarter profit forecast."
Scaled-down versions of the Galaxy and other models are being released to protect market share from Chinese rivals selling smartphones for $100.
To help boost demand for its devices in the $358 billion mobile-phone market, Samsung worked with rapper Jay-Z to launch his new album before its official release via an app exclusive to models including the Galaxy S3, S4 and Note 2.
The company also plans to release more high-end models this year, including a device using the Tizen operating system and the Galaxy Note 3.
"Apple is suffering from iPhone fatigue, while Samsung is suffering from Galaxy fatigue," Neil Mawston, executive director of Strategy Analytics, said in an e-mail before the release.
Samsung shipped 69.4 million smartphones in the first quarter, Strategy Analytics said in April.
Profit at the semiconductor division probably rose 74 percent to 1.8 trillion won on sales of 9.41 trillion won, according to the Bloomberg News survey.
The price of the benchmark DDR3 2-gigabit DRAM closed at $1.92 on July 1, compared with $1.74 on April 1, according to data from Taipei-based DRAMeXchange Technology Inc., operator of Asia's largest spot market for semiconductors.
A limited chip supply and increasing demand for mobile semiconductors, especially from China, is helping push up prices, said Kim Young Dae, an analyst at Taurus Investment & Securities Co. in Seoul. Samsung makes more than half the world's mobile dynamic random access memory chips.
"The continued rise in chip prices is expected throughout the latter half of the year," Kim said.
Samsung's display division, which dominates the market for panels using organic light-emitting diodes, likely had an operating profit of 1.1 trillion won, according to the Bloomberg News survey. Sales at the division, which supplies its own handsets and tablet computers, probably fell to 7.91 trillion won.
Operating earnings from the TV-making unit probably slumped to 390 billion won in the June quarter, according to the analyst survey, as companies struggled to stay profitable by slashing prices. Samsung is the world's biggest TV maker with 27.9 percent market share by revenue from flat-panel sets, researcher Display Search said in June.