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BlackBerry Likely to Top Earnings

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We expect Research in Motion Limited , the Canadian handset manufacturer, to surpass expectations when it reports first-quarter fiscal 2014 results before the opening bell on Jun 28, 2013.

Why a Likely Positive Surprise?

Our proven model shows that BBRY is likely to beat earnings because it has the right combination of two key ingredients.

Positive Zacks ESP: Expected Surprise Prediction or ESP (Read: Zacks Earnings ESP: A Better Method), which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +100.00%. This is a meaningful and leading indicator of a likely positive earnings surprise.

Zacks Rank #3 (Hold): BBRY currently has a Zacks Rank #3. Note that the stocks with a Zacks Ranks of #1 (Strong Buy), #2 (Buy) and #3 (Hold) have a significantly higher chance of beating earnings.

The combination of BBRY’s Zacks Rank #3 (Hold) and +100.00% ESP makes us confident of a positive earnings beat on Jun 28, 2013.

What is Driving the Better-Than-Expected Earnings?

BBRY is poised for a better performance as the company’s newly-launched BB10 operating system-based smartphone Z10 is receiving good response in the global market. BBRY has made significant development in its latest platform by enriching it with popular applications and is also actively promoting its latest operating platform. However, we remain skeptical about the success of BB7 as low-end customers continue to prefer low budget Android phones over BlackBerry’s legacy handsets.

The average selling price (ASP) of the handsets is expected to rise based on the high price of BB10 units, which in turn could improve margins. However, sustainability of the current momentum and the rise in material costs on account of the use of expensive parts, remain the near-term headwinds for the company.

Other Stocks to Consider

Other companies you may want to consider on the basis of our model, which shows that they have the right combination of elements to post an earnings beat this quarter, are as follows:

  • Cablevision Systems Corporation has Earnings ESP of +33.33% and carries a Zacks Rank #3 (Hold)
  • Tivo Inc. (TIVO - Free Report) has Earnings ESP of +30.00% and carries a Zacks Rank #3 (Hold)
  • Leap Wireless International Inc. has Earnings ESP of +25.24% and carries a Zacks Rank #3 (Hold)

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