Blackberry bbry Research in Motion Ltd

Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB) reported earnings earlier today. Investors were initially excited by the results, and sent shares of  Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB) up several points, before closing down 0.84 percent for the day. Overall, the results beat expectations and analysts were surprised, but many judged that it was too early to draw a conclusion. It must be noted that many of the analysts have an awful track record on their BBRY calls. Below we have highlights from some of the major research firms on the earnings report:

Sterne Agee ‘Return to Profitability Sooner Than Expected Driven by Big Gross Margin Upside; Raising Estimates’

BBRY reported a surprisingly strong Feb. quarter where it returned to profitability much sooner than expected. This was driven by a big gross margin upside from cost reductions and 1 mm BB10 shipments. However, its cash balance declined by $63 million and subscriber base by 3 million. The key takeaway is that BBRY is here to stay with stabilization in its business and balance sheet. The key question remains whether the company can maintain momentum within an increasingly AAPL and GOOG world.

BAML ‘The numbers don’t tell the story yet’

The quarter had some good and bad parts, but it is too early to conclude on the success or failure of BBRY turnaround. Sales declined 36% YoY, unit ex-BB10 down 25% QoQ and subs declined 3mn users. But on the positive side, BB10 sell-in was 1mn in just one month; gross margin, at 40%, was better than Street’s 30.8%; device ASPs increased and EPS was +$0.22 vs. Street’s -$0.30. However, some one-offs helped, included $112mn in tax benefit that added 22c, 4c from cost cuts and 500bps due to lower amortization (21c benefit). Adding these back yields loss per share of 23c. We increased EPS estimates to reflect higher device ASPs and better margins and increase our PO to $8, but maintain their Underperform given the challenged fundamentals and outlook.

Credit Suisse ‘Results decent, we question sustainability’

Research in Motion’s F4Q13 results were ahead of expectations with the company returning to profitability for
the first time in a year. This is to be commended, though we question the sustainability particularly with respect to the GM improvement given the company’s positioning in the hyper-competitive smartphone market and the boost from declining amortization. Additionally, we believe the company’s major business model change in services will result in a significant decline in the high margin revenue stream, driving operating losses and potential cash burn. CS adjusts their EPS estimates to $0.25/-$1.07 in FY14/FY15 and reiterate Underperform rating and $10 TP.

Citi ‘Easter Bunny Delivers More Sweet vs Sour Treats But Keeps the Turnaround Debate Going’

The real shocker was the company reported a profit of $0.22 EPS compared to the consensus loss of -$0.31. This caused the stock to initially rally +10-15% but more detailed analysis shows a $0.20 EPS boost came from lower taxes, so the materiality of the EPS beat was not quite as shocking as the first look and evidenced by the stock later trading relatively flattish today. The results & commentary from the conference call provide a real Easter treat with more sweet positives than sour treats but definitely keeps the turnaround debate going.

Deutsche Bank ‘Good print, but significant challenges still ahead’

Blackberry announced Q4 revenues of $2.7 billion, above our estimate of $2.6 billion but below consensus of $2.8 billion. Pro-forma EPS was $0.22 including a modest operating loss, above our estimate of ($0.95) and consensus of ($0.31). The company shipped 6 million smartphone units in the quarter. While the company had a moderately successful launch of the Z10, we highlight that there is a long way to go and believe they still have significant challenges in the form of maintaining their subscriber base during a platform transition and slowing the decline of service revenues both during and after this transition. As a result we maintain our Hold rating.