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BlackBerry (BB) to Report Q2 Earnings: What's in Store?

Zacks Equity Research

BlackBerry Limited BB is scheduled to report second-quarter fiscal 2020 financial results (ended Aug 31, 2019) before the opening bell on Sep 24. In the last reported quarter, the company’s EPS matched the Zacks Consensus Estimate. BlackBerry surpassed the consensus estimate for earnings thrice in the trailing four quarters, delivering an average positive surprise of 81.3%.

The cybersecurity software company continues to invest in the right opportunities to drive long-term growth and profitability. Let’s find out how things are shaping up prior to the announcement.

Factors at Play

During the fiscal second quarter, BlackBerry’s new Government Mobility Suite received Federal Risk and Authorization Management Program (FedRAMP) Ready status. Listed on FedRAMP’s Marketplace, the solution is based on BlackBerry UEM and provides IT administrators with a single view of users, devices and applications across multiple OS endpoints.

FedRAMP’s monitoring and reporting for BlackBerry Government Mobility Suite is provided by BlackBerry’s U.S. Cyber Security Operations Center and Compliance staff. The company created BlackBerry Government Solutions to boost its FedRAMP initiatives. Headquartered in Washington, D.C, BlackBerry Government Solutions has a separate corporate governance structure to comply with U.S. national security requirements.

The move has allowed the company to deepen its reach within the U.S. government sector by ensuring that its next-generation cybersecurity solutions and Spark platform meet FedRAMP and Authority to Operate certifications while providing customers with better service.

BlackBerry expanded its partnership with LG Electronics to accelerate the deployment of connected and autonomous vehicle technology for automotive OEMs and suppliers worldwide. LG is using a range of BlackBerry QNX software and services to build digital consolidated cockpits, including infotainment systems, digital instrument clusters and telematics systems for several OEMs.

In June 2019, BlackBerry said that its flagship QNX software was embedded in more than 150 million cars present on road. The feat marked an increase of 30 million cars since the company presented its automotive footprint in 2018.

Further, BlackBerry introduced CylanceGUARD — a managed detection and response solution that leverages Cylance security experts and its artificial intelligence platform. The combination of BlackBerry Cylance’s AI and ML cybersecurity capabilities with BlackBerry Spark has made its endpoint management and embedded software products more essential for businesses to generate value from the Internet of Things.

The company aims to increase market share for BlackBerry Cylance, while improving profitability and reducing the cash burn. However, challenging macroeconomic environment and geopolitical uncertainty related to Brexit remain near-term risks.

Adverse foreign currency fluctuation is another headwind. As BlackBerry expands service portfolios, a decisive challenge persists as competitors tend to offer services at lower margin and disruptive prices in key segments. As such, the company might not be able to tide over the broader challenges in the near future.

For the to-be-reported quarter, the Zacks Consensus Estimate for adjusted loss per share is pegged at 1 cent. The company reported earnings of 4 cents in the prior-year quarter.

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’ll see below:

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

BlackBerry Limited Price and EPS Surprise

BlackBerry Limited Price and EPS Surprise

BlackBerry Limited price-eps-surprise | BlackBerry Limited Quote

Zacks Rank: BlackBerry currently has a Zacks Rank #3, which increases the predictive power of ESP. However, the company’s 0.00% Earnings 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:

Micron Technology, Inc. MU with an Earnings ESP of +11.35% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

FactSet Research Systems Inc. FDS with an Earnings ESP of +0.57% and a Zacks Rank #3.  

Landec Corporation LNDC with an Earnings ESP of +0.64% and a Zacks Rank #3.

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