Research in Motion First Quarter Earnings Preview

Research in Motion [[RIMM]] is scheduled to report their first quarter 2010 results after the market closes on Thursday, June 18. Based on our analysis, we at are expecting RIMM to report better than expected results that exceed Wall Street’s consensus expectations.


Analyst Expectations

We are forecasting revenues of $3.46 billion and EPS of $.95. This would represent a 54% increase in revenues from last year’s $2.24 billion in the same period. The current analyst consensus estimates calls for revenues of $3.41 billion and EPS of $.93. On April 10, the company provided first quarter revenue guidance of $3.3 – $3.5 billion and EPS of $.88 – $.97.


While Palm [[PALM]] and Apple [[AAPL]] have captured most of the headlines recently with new smart phone releases, Research in Motion stands to benefit from the strong momentum of new product releases earlier in the quarter. All indications point to strong sales of the recently released Storm and Curve 8900 phones. We expect that strong sales activity should drive earnings leverage that will allow RIMM to come in at the high end of their guidance range.


The combination of new products, aggressive promotions, and favorable pricing has allowed the smart phone market to remain fairly immune to the current global recession. Research in Motion appears to have strong product pipeline for the remainder of 2009 with the expected launches of the Bold 2 and Curve 2 in the coming months.


Share Performance

Since the beginning of the year, Research in Motion’s shares are up an amazing 110%. In 2008, FDX’s shares fell 64% as the stock badly under-performed the 34% decline in the Dow Jones industrial average.



Shares are now trading at 18x consensus fiscal 2010 EPS estimates. This is above the relative valuations of their peer group. Despite the fact that RIMM’s stock price has doubled since the beginning of the year, the shares still don’t appear that expensive. Given the strong momentum that the company currently has and the opportunity to deliver strong first quarter results we would continue to buy even at these levels.


Recommendation: Buy with a $100 price target.


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