Q2 Preview: Breaking! RIM (RIMM) Expected to Miss Earnings

Research In Motion (Nasdaq: RIMM) shares are looking weak Wednesday ahead of the company's second-quarter earnings results.

After the market close, RIM is expected to report earnings of 87 cents per share on revenue of $4.47 billion. Such earnings would be a 25 percent drop from the first quarter and a 40 percent drop from the same period last year

Shares fell 24 percent through the quarter and are down 9 percent since. The stock is 49 percent lower since the start of 2011. RIM has traded in a range of $21.60 to $70.54 over the last 52-weeks, with the high right in the middle of February, and low in early August.

RIM is trading at a forward P/E of 5.7x next year's earnings estimates, compared with 17.8x for Nokia (NYSE: NOK) and 12.1x for Apple (Nasdaq: AAPL). The ratio makes RIM look cheap -- but remember -- shares are down nearly 50 percent on the year already. The Street's current estimates suggest RIM will grow just 1.9 percent from it's fiscal 2012 to 2013, or $5.20 to $5.30. Nokia, in sort of a comparison, should grow earnings 13 percent from 31 to 35 cents per share, while Apple is looking at expanding earnings nearly 18 percent over the same period.

Data from Streetinsider.com's Ratings Insider has six analysts with a Buy rating, 26 at Neutral, and 10 suggesting to Sell. The average price target on the Street is $35.50, with a low of $18 and high of $55.

For investors considering getting into the stock ahead of the earnings, here's an example of why you should take a second look. The online tech blog, BoyGeniusReport recently reviewed RIM's latest BlackBerry offering, the Torch 9850 -- RIM's foray into the touch screen-only world. Basically, the site tore ithe new device apart: the design was mediocre, with smooth surfaces broken up, and buttons offering no feedback, the OS was the same (bummer), the keyboard was bad ("the keyboard on the BlackBerry Torch 9850 is probably the worst touch keyboard I think I have ever used," said the reviewer), though he did like the dial pad for the phone and the battery life was acceptable.

With the QNX OS not expected until sometime in 2012, investors might just want to wait out RIM for now until some better revisions come out of Waterloo.

Analyst Comments

• Goldman Sachs sees earnings of 75 cents per share and revenue of $4.147 billion. Goldman is expecting results to come in below Street expectations, and guidance to also be weak (EPS of $1.38 and revs of $4.672 billion). "We assume that tablets contribute about 5% of total hardware revenue, or $148.8 mn, with shipments of 350k; the Street is modeling 562k."
  
  
• J.P. Morgan is looking for earnings of 90 cents per share and revenue of $4.488 billion. JPM sees second-quarter smartphone shipments of 11.75 million, 700,000 playbooks, and 39 percent gross margin. "We will be looking for indications that RIMM is on track for QNX based smartphone launch in early 2012...Sprint has now backed out of its plan to sell a WiMax version of the Playbook. We believe that sell-through of Playbook was weak during the quarter."
  
  
• Wedbush is modeling for earnings of 90 cents and revenue of about $4.5 billion. "We expect RIM to report sell-in of 11.75 million smartphone units, inline with guidance of 11.0-12.5 million units. We believe there could be some upside, as RIM should benefit from thin channel inventories as carriers awaited the delayed BlackBerry 7 devices. We expect a device ASP of $265. We expect net subscriber additions of 5.0 million."
  
  
• Wells Fargo is modeling for revs of $4.30 billion and earnings of 82 cents per share. Shipments should be about 11.8 million, with 11.3 million smartphones and 500,000 of tablets. Handset ASP is $260.

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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