Q1 Preview: RIM (RIMM) Shares Look Cheap into Results, But Guidance Looms

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Research In Motion (Nasdaq: RIMM) shares are looking spry Thursday, up 1.3 percent ahead of its first-quarter earnings, expected out after the close.

RIM is expected to report earnings of $1.32 per share on revs of $5.15 billion. The numbers follow a lowered first-quarter outlook in late April: from a range of $1.47 - $1.55 to $1.30 - $1.37. RIM cited lower volumes of BlackBerry smartphone shipments in the quarter, expected at the lower-end of the 13.5 to 14.5 million estimate.

The main focus of the earnings report -- from an analyst and trader perspective anyways -- will be on the company's FY12 guidance. With its lowered first-quarter guidance on April 28th, the BlackBerry-maker affirmed it will achieve a previously-issued target of $7.50, now about $1.21 above the current Street estimate.

Analysts are rather complacent on the shares into earnings; Bloomberg data suggests 14 analysts have a Buy on the stock, 27 have a Hold, and 12 recommend to Sell. The average analyst price target is $51, with a low of $31 and high of $70. RIM has traded in the range of $34.91 to $70.54 over the last 52-weeks.

Following its 49.9 percent drop from its February high, RIM is trading with a comfortable forward P/E of 5.4x, versus 11.4x at Apple, Inc. (Nasdaq: AAPL) and 13.4x for Nokia (NYSE: NOK).

Analyst Conversation

• Goldman Sachs lays it flat-out: "near-term weakness is already baked into the stock, while EPS decline next year is not." Goldman is looking for about 13.5 million smartphone shipments. Tablets should contribute to about 4 percent of hardware revs, with 350,000 shipments.
  
  Goldman is looking for FY12 EPS of $5.77 driven by: "1) lower smartphone ASPs (GS at $282 vs. Street at $289), 2) lower smartphone units (GS at 60 mn vs. Street at 62 mn), and 3) a lower operating margin."
  
  
• Wedbush sees EPS of $1.32 and revs of $5.1 billion. Unit sales are expected to be $13.5 million units, with device Average Selling Price of $280. Net sub adds should be 4.8 million. PlayBook sales are also expected to be 450K at an ASP of $450.
  
  Looking ahead, Wedbush sees FY12 EPS of $6.63 and revs of $24 billion. The numbers reflect "an underwhelming PlayBook launch, negative FQ1 pre-announcement, and our belief that the new Bold device with its smaller screen size relative to peers will see a disappointing introduction."
  
  
• BGC Partners is looking for EPS of $1.37 and revs of $5.16 billion. "We are interested to see if the company is able to produce results at the high end of its lowered outlook or if demand has fallen to the extent that the revised outlook is a struggle to achieve."
  
  For its August quarter, BGC expects it "to be lackluster as the company 1) has not launched its latest lineup of phones on the existing blackberry OS platform and 2) the transition process to its higher end QNX platform for phones is starting and is going to be a drag for the remainder of the year." BGC sees FY12 EPS of $6.59 and revs of $23.58 billion.

Overall, shares of RIM are more likely to move on guidance for RIM, rather than quarterly results. It's tablet, the PlayBook, has met mixed reviews, though the BlackBerry still has a solid email system that may continue to be attractive to businesses.Stay tuned to StreetInsider.com's EPS Insider section to see our analysis of the highly-anticipated quarterly results within seconds of the release.

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