Earnings Scorecard: Research In Motion - Analyst Blog

Research In Motion Ltd. ( RIMM ) reported third quarter 2012 financial results, where earnings per share ( EPS ) surpassed the Zacks Consensus Estimate but revenues missed the same. Moreover, the company reported weak financial outlook for the fourth quarter of fiscal 2012.

Third Quarter Highlights

Total revenue in the reported quarter was $5,169 million, down 5.9% year over year. Adjusted revenue of $5223 million in the quarter remained below the Zacks Consensus Estimate of $5,284 million.

Net income in the reported quarter was $265 million or 51 cents per share compared with $911 million or $1.74 per share in the prior-year quarter. Adjusted EPS (excluding PlayBook inventory provision, cost optimization program expense and service interruption cost) of $1.27 was ahead of the Zacks Consensus Estimate of $1.23.

Gross margin in the reported quarter was 27.3% compared with 43.6% in the year-ago quarter and 38.7% in the previous quarter. During the reported quarter, Research In Motion shipped around 14.1 million BlackBerry smartphones and around 150,000 BlackBerry Playbook tablets.

Agreements of Analysts

Of the 31 analysts covering the stock in the last 7 days, none revised their estimates for the fourth quarter of 2012. Likewise, for fiscal 2012, out of the 34 analysts covering the stock in the last 7 days, none changed their estimates. Similarly, for fiscal 2013, none out of the 38 analysts revised their estimates.

Currently, the Zacks Consensus EPS Estimate for the fourth quarter of 2012 is pegged at 84 cents, which projected an annual decline of 53.08%. Similarly, for the first quarter of 2013, the current Zacks Consensus EPS Estimate of 74 cents indicates a loss of 44.56% year over year.

Magnitude of Estimate Revisions

In synergy with the analysts estimate, during the last 7 days, the current Zacks Consensus Estimate remained at 84 cents for the fourth quarter 2012 and at 74 cents for the first quarter of 2013. Likewise, for fiscal 2012 and 2013, the current Zacks Consensus Estimates remained at $4.14 and $3.07, respectively.

Earning Surprises

With respect to earnings surprises, the company beat the Zacks Consensus Estimate in three of the last four quarters. The average earning surprise during the last four quarters stood at a negative 0.89%.

The ongoing quarter contains an upside potential of (essentially a proxy for future earnings surprises) 0.00% while the upcoming quarter reflects a 4.05% downside potential. Likewise for fiscal 2012 and fiscal 2013, Zacks Consensus Estimates downside potentials are 0.48% and 4.89%, respectively.

Our Recommendation

Woes continue for the company as it is consistently losing market share owing to stiff competition from Apple Inc. 's ( AAPL ) tablets and newly released iPhone 4S that has already garnered huge demand during this holiday season. Concurrently, Research In Motion has reduced its fourth quarter financial outlook, hence raising concern for the investors.

Recently, Research In Motion also slashed its tablet prices in order to clear its inventory backlog. Additionally, the company has delayed the launch of its new QNX-based smartphones, which was expected to be launched in the first quarter of 2012. These combined factors will further put pressure on the company's margins and EPS going forward.

However, strong subscriber growth and increased smartphone sales arising from the launch of new BlackBerry 7 smartphones will act as catalysts for growth in the near term.

We, thus, maintain our long-term Neutral recommendation for Research In Motion Ltd. Currently, Research In Motion Ltd has a Zacks #4 Rank, implying a short-term Sell rating.

About Earnings Estimate Scorecard

Len Zacks, PhD in mathematics from MIT, proved over 30 years ago that earnings estimate revisions are the most powerful force impacting stock prices. He turned this ground breaking discovery into two of the most celebrating stock rating systems in use today. The Zacks Rank for stock trading in a 1 to 3 month time horizon and the Zacks Recommendation for long-term investing (6+ months). These "Earnings Estimate Scorecard" articles help analyze the important aspects of estimate revisions for each stock after their quarterly earnings announcements. Learn more about earnings estimates and our proven stock ratings at:

APPLE INC ( AAPL ): Free Stock Analysis Report

RESEARCH IN MOT ( RIMM ): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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