BlackBerry (BB) Gears Up for Q1 Earnings: What Lies Ahead?

Zacks Equity Research

BlackBerry Limited BB is scheduled to report first-quarter fiscal 2020 financial results (ended May 31, 2019) before the opening bell on Jun 26. In the last reported quarter, the company delivered a stellar earnings surprise of 175%.

Let’s find out how things are shaping up prior to the announcement.

Factors at Play

Riding on its technological prowess, BlackBerry secured coveted contracts from NATO during the quarter to encrypt its communications and secure data from possible data espionage. The company has also integrated the BlackBerry QNX and WHIS operating systems in the fiscal first quarter to enable system designers to take full advantage of heterogenous multicore SoCs containing application cores in safety-critical systems to secure data.

BlackBerry is likely to record healthy revenue growth leveraging on BlackBerry Cylance while improving profitability and reducing cash burn. In addition, the company has created BlackBerry Government Solutions — a new independent subsidiary — which will accelerate its Federal Risk and Authorization Management Program (FedRAMP) initiatives. Headquartered in Washington, DC, BlackBerry Government Solutions has a separate corporate governance structure to comply with U.S. national security requirements. The move allows the company to deepen its reach within the U.S. government sector by ensuring that its next-generation cybersecurity solutions and Spark platform meet FedRAMP and Authority to Operate certifications while providing customers better service.

With a holistic growth model, focusing both on organic and inorganic investments, BlackBerry is expanding its leadership in the mobility segment. The company is increasingly focusing on BlackBerry Spark and BlackBerry UEM to create additional revenue-generating opportunities. In addition, BlackBerry is helping private and public sector firms to accelerate the development of Smart Cities and Intelligent Transportation Systems with a Security Credential Management System service.

The company’s increasing market traction will likely translate into top-line growth. For the quarter, the Zacks Consensus Estimate for total revenues stands at $249 million, up from $217 million reported in the year-earlier quarter. Adjusted earnings per share for the quarter are pegged at a penny, down from 3 cents reported a year ago.

Earnings Whispers

Our proven model does not conclusively show that BlackBerry is likely to beat earnings this quarter as it does not possess the key components. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here as you will see below:

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and Zacks Consensus Estimate, is 0.00% as both are pegged at a penny. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

BlackBerry Limited Price and EPS Surprise


BlackBerry Limited Price and EPS Surprise

BlackBerry Limited price-eps-surprise | BlackBerry Limited Quote

Zacks Rank: BlackBerry has a Zacks Rank #3. While this increases the predictive power of ESP, we need to have a positive ESP to make us reasonably confident of an earnings beat.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.

Stocks to Consider

Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post earnings beat this quarter:

AT&T, Inc. T is likely to release results on Jul 23. The company has an Earnings ESP of +1.64% and has a Zacks Rank #2.

Verizon Communications, Inc. VZ is likely to release results on Jul 23. The company has an Earnings ESP of +4.35% and has a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Earnings ESP for Ericsson ERIC is +4.35% and it carries a Zacks Rank of 3. The company is scheduled to report quarterly numbers on Jul 17.

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