Like Mark Twain, who addressed a rumor by famously writing that reports of his death were exaggerated, BlackBerry Ltd. (BBRY.O) seems to rising anew. Against all odds, the company continues its turnaround under the leadership of CEO John Chen, now focusing away from smartphones and towards “software, enterprise, security and the Internet of Things,” according to a BlackBerry statement. For example, the U.S. Army continues to be a big customer. Is revival calling BlackBerry’s number?
After seeing revenues fall drastically over the past five years, the company is also prioritizing revenue stabilization. Over the past year there have been some positive signs, and in this quarter, a positive 10% StarMine Predicted Surprise indicates that the company may beat earnings estimates.
Source: Eikon/StarMine
Not as bad as before
While estimates have remained flat over the past three months, the StarMine SmartEstimate remains a cent above the I/B/E/S consensus and calls for a loss of 2 cents per share. There is even a 5-star rated analyst calling for earnings of 11 cents per share. For some context, a year ago, analyst consensus was for a loss of almost 70 cents per share for the whole year. That number is now a loss of just 7 cents a share. Clearly Chen has figured out a way to improve BlackBerry’s earnings prospects.
Source: Eikon/StarMine
Asset returns turn up
One of our favorite measures for management efficiency is return on net operating assets (RNOA). By this measure, we can start understanding why possibly analysts are raising their earnings estimates. After steadily falling over the past five years, trailing 4Q RNOA has increased dramatically over the past three quarters. While RNOA hasn’t yet reached levels seen in 2010, the fact that it is finally positive again and trending higher is a good sign for BlackBerry.
One thing to watch out for is that the shorts are piling onto the stock. However, that has also increased the likelihood of a short squeeze, according to the StarMine Short Interest (SI) model. Just yesterday, BlackBerry announced a buyback program of 12 million shares over the next year sending the stock up more than 2%, in a move that possibly indicates management thinks the stock may be undervalued. Blackberry has handily beaten estimates in each of the last five quarters, and from the look of things, it may beat estimates again this quarter. The company may not have to dial long distance for good news.
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