Earnings Preview: RIMM

Zacks

Research In Motion Ltd., (RIMM) is scheduled to release its fiscal third-quarter 2013 (ended November 30, 2012) results on Thursday, December 20, after the closing bell. The current Zacks Consensus Estimate for the to-be-reported quarter is a loss of 35 cents, representing an annualized decline of 127.9%.

Research In Motion has outperformed the Zacks Consensus Estimate in only two out of the last four quarters with an average earnings surprise of a negative 158.74%.

Second Quarter Recap

On September 27, 2012, Research In Motion reported fiscal second-quarter 2013 financial results. GAAP net loss in the second quarter was $235 million or a loss of 45 cents per share compared to a net income of $329 million or 63 cents per share in the year-ago quarter. Quarterly loss per share of 45 cents was better than the Zacks Consensus Estimate of a loss of 46 cents per share.

Total revenue in the second quarter of fiscal 2013 was $2,873 million, down by a whopping 31% year over year but way head of the Zacks Consensus Estimate of $2,478 million.

Agreement of Analysts

For the fiscal fourth quarter of 2013, in the last 30 days, out of the 29 estimates, there were no downward revision of estimates but at the same time there were four upward revisions of earnings per share estimates. Likewise, for the fiscal first quarter of 2013, out of the 28 estimates, there were two downward revisions of estimates while three revisions moved in the opposite direction.

For the fiscal year 2014, in the last 30 days, out of the 29 estimates, only one estimate moved downward while four moved in the opposite direction. For fiscal 2015, out of the 33 estimates, none have slashed their estimates, while seven have revised their estimates upward over the same period.

Strong cash position coupled with upcoming BlackBerry 10 software-based smartphones has driven the estimates upward. However, stiff competition from Apple Inc.’s (AAPL) iPhones and Google Inc.’s (GOOG) Android-based smartphones may act as a headwind for the company going forward.

Magnitude of Estimate Revisions

Over the last 30 days, the current Zacks Consensus Estimate has risen only by a penny to a loss of 35 cents for the fiscal fourth quarter of 2013 while there was no change in estimate for the first quarter of fiscal 2014.

Likewise, for fiscal 2014, during the last 30 days, the current Zacks Consensus Estimate increased only by a penny to a loss of $1.25 while for fiscal 2015, the current estimate stood at a loss of 47 cents, which was 12 cents below the earlier estimate.

Earning Surprises

In the previous quarter, Research In Motion reported loss per share of 45 cents, which fell short of the Zacks Consensus Estimate by a penny. The current Zacks Consensus Estimates for the ongoing quarter imply a 0.00% upside potential while for the next quarter it contains a downside risk of 23.08% (essentially a proxy for future earning surprises). Likewise, the estimate for fiscal 2014 reflects downside potentials of 4.00% but for fiscal 2015, the growth potential stood at 82.98%.

Our Recommendation

We maintain our long-term Neutral recommendation for Research In Motion. Currently, it has a Zacks #2 Rank, implying a short-term Buy rating on the stock.

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