Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB), the Canadian smartphone manufacturer shocked the Wall Street with a rise in profit during the Q4. Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB) reported that the company has sold 1 million Z10 smartphones, which was more than what analysts were predicting.

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See Goldman Sachs’ expectations for Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB):

Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB) (now Blackberry) reported FY4Q (Feb) adjusted EPS of $0.22, above GS/Street at ($0.23)/($0.34), and sales of $2.68bn, below GS/Street at $3.13bn/$2.90bn. BB10 shipments of 1.0mn were ahead of GS/Street at 650k/915k, but total units of 6mn missed GS/Street at 8.2mn/6.9mn. The subscriber base fell to 76mn (from 79mn), vs. GS/Street at 76mn/78mn. For FY1Q (May), the company expects to approach breakeven despite a 50% increase in marketing expenses, vs. prior GS/Street estimates of ($0.04)/($0.13).

Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB) earnings beat was driven by higher gross margins of 40.0%, vs. GS/Street at 29.2%/30.9%. Relative to Goldman Sachs’ estimates, the beat was driven by lower shipments of BB7 and prior generation smartphones and higher BB10 shipments. In addition, about 475bp (or almost half) of the gross margin beat was due to lower intangible asset amortization ($136 mn in FY4Q vs. $263 mn in FY3Q in COGS) as Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB) renegotiated some supplier agreements, which allowed it to stretch out the amortization period over a larger number of quarters/units. Analysts at Goldman calculate that hardware gross margins rose from -3% to 15% sequentially and from 14% to 23% excluding amortization.

Overall, analysts remain Neutral, as Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB) stock’s muted reaction to the EPS beat suggests that the gross margin expansion is now understood, consistent with Goldman’s recent downgrade, and performance from here will depend on the traction of BB10, most importantly in the US where the Z10 launched at Verizon yesterday. Analysts’ FY14/FY15 revenue estimates change by less than 2%, but their FY14E/FY15E EPS goes to $0.18/($0.44) from $0.12/($0.87) on higher gross margins; Goldman introduce a FY16E EPS of ($0.74).

Goldman Sachs’ 12-month, $17 price target is unchanged, based on a fundamental scenario analysis (85%) and their theoretical M&A valuation (15%).