A month has gone by since the las t earnings report for BlackBerry (BB). Shares have added about 15.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is BlackBerry due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recen t earnings report in order to get a better handle on the important catalysts.
BlackBerry Q3 Earnings Beat on Solid Revenues
BlackBerry reported healthy third-quarter fiscal 2020 (ended Nov 30, 2019) results on solid revenue growth. The company also remained confident to meet the consensus estimates for fiscal 2020 or even surpass them based on strong year-to-date performance. Buoyed by the robust quarterly results, shares were up 12.4% post earnings release to close at $6.53 as on Dec 20, 2019. Bottom Line
On a GAAP basis, net loss for the quarter was $32 million or loss of 7 cents per share against net income of $59 million or 1 cent per share in the year-ago quarter. The year-over-year decline was primarily due to higher operating expenses.
Excluding non-recurring items, BlackBerry recorded non-GAAP earnings of $17 million or 3 cents per share, which surpassed the Zacks Consensus Estimate by 2 cents. Revenues
Quarterly GAAP revenues increased 18.1% year over year to $267 million. Non-GAAP revenues improved 22.8% to $280 million with strong performance of the software and service businesses (up 26% year over year to $275 million). Region wise, North America generated GAAP revenues of $188 million compared with $151 million in the year-ago quarter. Revenues from Europe, Middle East and Africa were $60 million, up 7.1% year over year, while revenues from other regions remained flat at $19 million.
By product and service type, non-GAAP revenues from IoT
decreased 3.3% year over year to $145 million. BlackBerry Cylance
non-GAAP revenues came in at $53 million, benefiting from its acquisition of cybersecurity firm, Cylance. This boosted the company's software and services business as it has provided additional cyber security capabilities with advanced artificial intelligence and machine learning technology. Non-GAAP revenues from Licensing
were $77 million, up 13.2% year over year, while Other
non-GAAP revenues decreased to $5 million from $9 million. Other Details
Gross profit for the quarter increased to $198 million from $170 million in the year-ago quarter on higher revenues. Total operating expenses more than doubled to $227 million from $112 million due to higher selling, marketing and administration expenses, and lower favorable adjustment of debentures fair value. Operating loss was $29 million against operating income of $58 million in the prior-year quarter. Cash Flow & Liquidity
During the first nine months of fiscal 2020, BlackBerry utilized $8 million of net cash for operations against cash generation of $82 million in the year-ago period. On a reported basis, the company generated $37 million of free cash flow in the quarter.
As of Nov 30, 2019, BlackBerry had $515 million in cash and equivalents. The cybersecurity software and services company's total cash, cash equivalents, short-term and long-term investments were $970 million as of the same date. Outlook
For fiscal 2020, management remains confident to meet the consensus estimate for non-GAAP earnings of 6 cents per share on revenues of $1.1 billion. Based on solid year-to-date performance, the company further expects to even top earnings estimates and record non-GAAP earnings in the vicinity of 8 cents per share.
BlackBerry continues to invest in the right opportunities to drive long-term growth and profitability. Its strong product cycle and incremental contribution from Cylance instill optimism. Further, the company is integrating its endpoint management and artificial intelligence technologies on one platform to address the high-growth endpoint security market.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.
At this time, BlackBerry has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile 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.
BlackBerry has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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