Research In Motion Ltd.,(RIMM) is slated to release its second-quarter 2012 results on Thursday, September 15, 2011, after the closing bell. The current Zacks Consensus Estimate for the second quarter is pegged at 89 cents per share, representing an annualized decline of 38.93%.
With respect to earnings surprises 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 4.18%, implying that the company outdid the Zacks Consensus Estimate by the same magnitude over the last four quarters.
First Quarter Recap
Total revenue was $4,908 million, up 15.9% year over year, but well below the Zacks Consensus Estimate of $5,400 million. In the reported quarter, Research In Motion shipped around 13.2 million BlackBerry smartphones and around 500,000 BlackBerry Playbook tablets.
Net income, in the first quarter of fiscal 2012, was $695 million or $1.33 per share compared with a net income of $769 million or $1.39 per share in the prior-year quarter. Quarterly EPS of $1.33 was slightly above the Zacks Consensus Estimate of $1.32.
Gross margin in the reported quarter was 43.9% compared with 45.4% in the year-ago quarter and 44.2% in the previous quarter. Segment wise, 78% revenue accounted for Device shipment, 20% for Services, and the remaining 2% for Software and Other revenue in the first quarter of fiscal 2012.
Agreement of Estimate Revisions
In the last 30 days, out of the 42 analysts covering the stock, 4 analysts increased their EPS estimates for the second quarter of 2012 while 3 decreased their estimates. Similarly, for the third quarter of fiscal 2012, 4 analysts increased their EPS estimates while 8 reduced the same.
For fiscal 2012, in the last 30 days, out of the 44 analysts covering the stock, 4 analysts increased the EPS estimate while 7 analysts decreased the same. Likewise, for fiscal 2013, 1 out of the 40 analysts revised their estimates upward while 9 analysts moved in the opposite direction.
Magnitude of Estimate Revisions
For the second quarter of 2012, the Zacks Consensus Estimate was 2 cents short of the current Zacks estimate of 89 cents. Likewise, the Zacks Consensus Estimate, for the third quarter of 2012, is pegged at $1.39, which is just a penny short of the current Zacks estimates.
For fiscal 2012, the Zacks Consensus Estimate was 7 cents ahead of the current estimate of $5.12. Similarly, for fiscal 2013, the Zacks Consensus Estimate is 3 cents ahead of the current estimate of $5.33.
Earning Surprises
In the previous quarter, Research In Motion reported EPS of $1.33, which beats the Zacks Consensus Estimate by a penny. The current Zacks Consensus Estimates for the ongoing quarter contains a 6.74% upside potential while for the upcoming quarter, it reflects a 0.71% upside potential (essentially a proxy for future earnings surprises). However, for fiscal 2012, the Zacks Consensus Estimate contains a 1.56% downside potential while fiscal 2013 reflects a 3.19% upside potential.
Our Recommendation
Booming smartphone markets and strong fundamentals, coupled with Research In Motion’s strong brand value and smartphone line-ups will act as positive catalysts for growth. Despite these positive factors, we expect stiff competition from Google Inc.’s (GOOG) Android-based smartphones and Apple Inc.’s (AAPL) iPhones to result in loss of market share.
Moreover, product delays, huge margin pressure, tepid response from newly launched tablets and lack of popular product launch will act as headwinds for the stock.
We, thus, maintain our long-term Neutral recommendation for Research In Motion Ltd. Currently, the company has a Zacks #3 Rank, implying a short-term Hold rating on the stock.
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