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InterDigital (IDCC) Issues Higher Revenue Guidance for Q2

Zacks Equity Research

InterDigital, Inc. IDCC recently offered healthy revenue guidance for second-quarter 2019. After reporting relatively lackluster results in the first quarter, the higher revenue expectations are likely to soothe investor nerves and propel its share prices.

Management currently expects second-quarter revenues to lie within $73 million to $77 million, excluding any potential impact from a new patent sale agreement or patent license deal inked in the remainder of the ongoing quarter. This compares favorably with revenues of $70 million generated in the year-earlier quarter.

InterDigital also provided an update about the pending acquisition of Technicolor SA’s Research & Innovation unit. The company expects to close the transaction during the current quarter with a one-time non-operating gain of $5-$10 million. Furthermore, InterDigital expects a sequential increase in operating expenses to the tune of $3-$5 million due to integration costs and recurring expenses related to the buyout.

Notably, InterDigital generates significant revenues by developing wireless technologies, and subsequently licensing patents of such technologies to third parties. The company expects to face no threat from licensing its patented technology to Chinese smartphone manufacturer Huawei, as U.S. export control laws do not cover patents as they are widely available in public domain and are not confidential technology secrets. Consequently, it expects to generate healthy revenues from patent licensing in the forthcoming quarters.

The improved top-line expectations follow lower-than-expected first-quarter 2019 results, wherein both the bottom line and the top line missed the respective Zacks Consensus Estimate. Net loss for the quarter was $2.8 million or loss of 9 cents per share against net income of $30.2 million or 85 cents per share in the year-ago quarter. The bottom line missed the Zacks Consensus Estimate of loss of 6 cents. Revenues totaled $68.6 million, down 21.5% year over year and missed the consensus estimate of $71 million.

Over the past year, the stock has lost 19.7% while the industry has rallied 6.7%.

Bottom-line estimates for 2019 have decreased 74.6% over the past year, and are currently pegged at 61 cents, portraying inherent challenges for the company. However, earnings estimates for 2020 are up 338.8% over the past year to $2.15.

InterDigital currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the industry include Harris Corporation HRS, Motorola Solutions Inc. MSI and Juniper Networks, Inc. JNPR, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.    

Harris has a long-term earnings growth expectation of 8%. It beat earnings estimates in each of the trailing four quarters, the average being 3%.   

Motorola has a long-term earnings growth expectation of 7.7%. It surpassed earnings estimates in each of the trailing four quarters, the average positive surprise being 7.6%.
Juniper has a long-term earnings growth expectation of 6.2%. It surpassed earnings estimates in each of the trailing four quarters, the average positive surprise being 30.5%.     

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