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Following the third-quarter 2013 earnings announcement on December 20, 2012 for Research In Motion Ltd., , there was a huge downward revision of EPS estimates.
Third Quarter Highlights
GAAP net income in the third quarter of fiscal 2013 was $14 million or 3 cents per share compared with $265 million or 51 cents per share in the year-ago quarter. The company incurred a huge one-time income tax benefit of $226 million. Excluding this item, quarterly adjusted loss per share of 22 cents was better than the Zacks Consensus Estimate of a loss of 35 cents per share. Total revenue in the quarter was $2,727 million, down by a whopping 47.2% year over year but well ahead of the Zacks Consensus Estimate of $2,647 million. Quarterly gross margin was 30.4% well above 27.2% in the prior-year quarter. Quarterly operating loss was $230 million compared to an operating income of $328 million in the year-ago quarter.
Agreements of Analysts
For the fourth quarter of fiscal 2014, in the last seven days, out of the 29 estimates, 14 were revised downwards but at the same time there were seven upward revisions of EPS estimates. Likewise, for the first quarter of fiscal 2014, out of the 25 estimates, 10 have lowered their estimates while seven estimates moved in the opposite direction.
Currently, the Zacks Consensus EPS Estimate for the fourth quarter of fiscal 2013 is pegged at a loss of 29 cents, reflecting an annualized decline of 136.38%. Similarly, for the first quarter of fiscal 2014, the current Zacks Consensus EPS Estimate of a loss of 16 cents indicates an year-over-year increase of 56.54%.
We believe that stiff competition from Apple Inc.’s (AAPL - Analyst Report) iPhones and Google Inc.’s Android-based smartphones coupled with a backdated operating system have caused downward revision of estimates. Moreover, delay in the launch of BlackBerry 10-based smartphones coupled with the lackluster performance of PlayBook tablets has resulted in further decrease in estimates.
Magnitude of Estimate Revisions
During the last 7 days, the current Zacks Consensus Estimate for the fourth quarter of fiscal 2013 was 2 cents above the loss per share of 27 cents of the previous Zacks Consensus Estimate. Similarly, for the first quarter of fiscal 2014, the current Zacks Consensus Estimate was 3 cents above the loss per share of 13 cents of the previous Zacks Consensus Estimate.
Likewise, for fiscal 2013, the current Zacks Consensus Estimate was 6 cents below the loss per share of $1.24 of the earlier Zacks Consensus Estimate. However, for fiscal 2014, in the last 7 days, the current Zacks Consensus Estimate was 4 cents above the loss per share of 52 cents of the previous Zacks Consensus Estimate.
Research In Motion produced an earnings surprise of 13 cents or 37.14% in the last quarter with an average earnings surprise of a negative 150.48% in the trailing four quarters. There are downside potentials (essentially a proxy for future earning surprises) of 3.45% and 12.5%, respectively, for the ongoing quarter and the next quarter. However, for fiscal 2013, the Zacks Consensus Estimate’s downside potential is 0.00% while 2014 contains a downside risk of 8.93%.
We maintain our long-term Neutral recommendation for Research In Motion. Currently, it has a Zacks #3 Rank, implying a short-term Hold rating on the stock.
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: http://www.zacks.com/education/