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Why Is InterDigital (IDCC) Down 2.9% Since Last Earnings Report?

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A month has gone by since the last earnings report for InterDigital (IDCC - Free Report) . Shares have lost about 2.9% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is InterDigital due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

InterDigital Q1 Earnings Miss Estimates, Revenues Down Y/Y

InterDigital reported lower-than-expected first-quarter 2019 financial results, wherein both the bottom line and the top line missed the respective Zacks Consensus Estimate.

Net Loss

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

The wireless R&D company’s revenues totaled $68.6 million, down 21.5% year over year. The top line missed the Zacks Consensus Estimate of $71 million. The decrease was primarily due to lower non-current patent royalties. While revenues from patent royalties came in at $66.4 million, the same from current technology solutions were $2 million.

Other Details

Total operating expenses were $68.8 million, reflecting an increase of 20% year over year, mainly due to $12.1 million of costs related to the acquisition of Technicolor SA's patent licensing business and the pending acquisition of Technicolor's R&I team.

Selling, general and administrative cost (as percentage of total operating expenses) was 20.7% compared with 24.8% in the year-ago quarter. Operating loss was $0.2 million against an operating income of $30.2 million a year ago.

Cash Flow and Liquidity

During the first quarter, InterDigital utilized $30.8 million of net cash from operating activities compared with cash utilization of $0.6 million in the year-ago period. During the same period, the company’s free cash flow was negative $40.8 million compared with negative $9 million in the prior-year period.

As of Mar 31, 2019, InterDigital had $793 million in cash and short-term investments with $67.5 million of long-term debt and liabilities.

Share Repurchase

During the reported quarter, the company repurchased 1.6 million shares for $109 million. Moreover, from Apr 1, 2019 through Apr 30, 2019 it repurchased an additional 0.3 million shares for $21.7 million. Notably, $37.4 million is remaining for repurchase subsequent to the increase in buyback authorization in December 2018.

Outlook

InterDigital is optimizing its strength in core wireless licensing business and has taken steps to drive shareholder value through the buyout of Technicolor licensing business. This has created significant new licensing opportunity in the video and consumer electronics markets. It remains poised to gain from future growth opportunities, fueled by the 5G rollout.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

Currently, InterDigital has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision has been net zero. Notably, InterDigital has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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