BlackBerry (BB) to Report Q2 Earnings: What’s in the Offing?

BlackBerry Limited BB is scheduled to report second-quarter fiscal 2019 financial results before the opening bell on Sep 28. The company is likely to report higher consolidated revenues on the back of healthy growth dynamics.

Whether this could result into an earnings beat for the quarter remains to be seen.

Key Factors to Consider

After withdrawing from direct smartphone manufacturing, Blackberry has gradually transitioned into a reliable software and services firm. The company delivers one of the most secure end-to-end mobile enterprise solutions in the market through a broad portfolio of products and services. It offers an end-to-end software and services platform for the Enterprise of Things, which includes computers, vehicles, sensors, equipment and other connected endpoints within the enterprise that communicate with each other to enable smart business processes.

With the continued digital transformation of enterprises, the number and scope of connected devices has also expanded manifold to include other endpoints such as vehicles. Moreover, with the rapid growth of this network of connected endpoints, often referred to as the IoT (Internet of Things), security has become increasingly important to thwart data theft. This landscape has created opportunities for secure management solutions, embedded systems, communications platforms, enterprise applications, networks and analytic tools, as well as for related services that help enterprises enhance data security and user privacy. BlackBerry has created a niche market for itself in this domain and seeks to strengthen its position with innovative safety features.

During the to-be-reported quarter, BlackBerry inked a multi-year strategic deal with Samsung Electronics Co. Ltd. to foster the development of integrated solutions and services to accelerate the digital transformation of businesses. Leveraging BlackBerry’s capabilities in endpoint security and management, the collaboration aims to manage various Samsung devices like mobile phones, tablets, wearables and the Samsung DeX mobile desktop experience, on a single glass pane. This would be achieved through BlackBerry Universal Endpoint Management platform, which offers complete endpoint management and policy control for a diverse fleet of devices and apps.

The company also teamed up with Bullitt Group, a British firm developing durable phones, to provide cybersecurity technology to the latter’s select range of connected devices. Bullitt’s Cat and Land Rover branded smartphones will be deemed “BlackBerry Secure” as these will be protected by BlackBerry’s indigenous technology. The joint venture attempts to address the growing demand for high security smartphones and remote monitoring, among both consumer and enterprise customers.

Moving ahead, such factors are likely to lend momentum to BlackBerry’s top-line growth, although it continues to suffer from foreign exchange volatility due to wide global exposure. High technological obsolescence also remains a significant challenge for the company, increasing its operating costs for continuous R&D efforts for frequent new product introductions to fend off competition.

What Our Model Says?

Our proven model does not conclusively show that BlackBerry is likely to beat earnings this quarter as it does not possess one of the two key components. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here as you will see below:

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is 0.00% as both are pegged at 1 cent. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: BlackBerry has a Zacks Rank #3, which when combined with 0.00% ESP, makes surprise prediction difficult.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.

Stocks to Consider

Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Alcoa Corp. AA has an Earnings ESP of +12.53% and a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Caterpillar Inc. CAT has an Earnings ESP of +1.14% and a Zacks Rank #1.

Flowserve Corporation FLS has an Earnings ESP of +4.31% and a Zacks Rank #2.

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