Research In Motion Ltd.(RIMM) is slated to release its first quarter 2012 results on Thursday, June 16, after the closing bell. The current Zacks Consensus Estimate for the first quarter is pegged at $1.32, representing an annualized growth of negative 4.07%.
With respect to earnings surprise over the trailing four quarters, Research In Motion has outperformed the Zacks Consensus Estimate in all the four quarters The average earnings surprise was a positive 4.74%, implying that the company has outdone the Zacks Consensus Estimate by the same magnitude over the last four quarters.
Fourth-Quarter Recap
On March 24, 2011, Research In Motion Ltd. reported its fourth quarter 2011 results. Quarterly net income was $934 million or $1.78 per share compared with a net income of $710 million or $1.27 per share in the year-ago quarter. Quarterly EPS of $1.78 was well above the Zacks Consensus Estimate of $1.75.
Fourth quarter 2011 total revenue was $5,556 million, up 36% year over year. This also exceeded the Zacks Consensus Estimate of $5,609 million. The growth in revenue was mainly due to higher demand for BlackBerry among non-business class people.
Agreement of Estimate Revisions
In the last 30 days, out of the 41 analysts covering the stock, EPS estimate was increased by 1 analysts for the first quarter of 2012 while 5 moved it downward. For the second quarter of fiscal 2012, out of the 40 analysts covering the stock, none increased their EPS estimates but 12 reduced it.
For fiscal 2012, in the last 30 days, out of the 44 analysts covering the stock, none increased their EPS estimates while 10 decreased it. Similarly, for fiscal 2013, out of the 33 analysts covering the stock, none increased their EPS estimates while 7 reduced their EPS estimates.
In synergy with the downward revision, we believe that stiff competition from Apple’s iPhone and Google’s Android-based smartphones, coupled with tepid response for their much-hyped PlayBook tablets and depleted outlook for the first quarter of 2012 will act as headwinds for the company going forward.
Magnitude of Estimate Revisions
During the last 30 days, the current estimates were just a penny short of the Zacks Consensus Estimate of $1.32. Likewise, for the second quarter of 2012, the current estimates were 3 cents short of the Zacks Consensus of Estimate $1.45. For fiscal 2012, the current estimates were 10 cents shy of the Zacks Consensus Estimate of $6.41. While for fiscal 2013, the current estimates were 19 cents short of the Zacks Consensus Estimate of $6.94.
Earning Surprises
In the previous quarter, Research In Motion Ltd. reported EPS of $1.78, which beat the Zacks Consensus Estimate by 3 cents. The current Zacks Consensus Estimate for the ongoing quarter contains 0.76% upside potential while for the upcoming quarter, it reflects a 2.11% downside potential (essentially a proxy for future earning surprises). Similarly, for fiscal 2012 and fiscal 2013, the Zacks Consensus Estimates downside potentials are 2.54% and 8.44%, respectively.
Our Recommendation
Growing demand for smartphones and deployment of 3G networks in emerging nations, coupled with Research In Motion’s new PlayBook tablets launch and the untapped global smartphone markets will act as positive catalysts for the company.Despite these positive factors, we expect stiff competition from Google Inc’s (GOOG) Android-based smartphones and Apple Inc’s (AAPL) iPhones,which will in turn result in loss of market share. Moreover, product delays, huge margin pressure, tepid response for the newly launched tablets, lack of popular product launch and launch of Blackberry look-alike handsets and smartphones at cheap rates are headwinds for the stock.
We, thus, maintain our long-term Neutral recommendation for Research In Motion Ltd. Currently, Research In Motion Ltd has a Zacks#4 Rank, implying a short-term Sell rating on the stock.
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