The Zacks Analyst Blog Highlights: Research In Motion, Apple, Google, NYSE
Euronext and IntercontinentalExchange
CHICAGO, Dec. 31, 2012
CHICAGO, Dec. 31, 2012 /PRNewswire/ -- Zacks.com announces the list of stocks
featured in the Analyst Blog. Every day the Zacks Equity Research analysts
discuss the latest news and events impacting stocks and the financial markets.
Stocks recently featured in the blog include Research In Motion Ltd.,
(Nasdaq:RIMM), Apple Inc. (Nasdaq:AAPL), Google Inc. (Nasdaq:GOOG), NYSE
Euronext Inc.(NYSE:NYX) and IntercontinentalExchange Inc.(NYSE:ICE).
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Here are highlights from Friday's Analyst Blog:
Earning Scorecard: RIMM
Following the third-quarter 2013 earnings announcement on December 20, 2012
forResearch In Motion Ltd., (Nasdaq:RIMM), there was a huge downward revision
of EPS estimates.
Third Quarter Highlights
GAAP net income in the third quarter of fiscal 2013 was $14 million or 3 cents
per share compared with $265 million or 51 cents per share in the year-ago
quarter. The company incurred a huge one-time income tax benefit of $226
million. Excluding this item, quarterly adjusted loss per share of 22 cents
was better than the Zacks Consensus Estimate of a loss of 35 cents per share.
Total revenue in the quarter was $2,727 million, down by a whopping 47.2% year
over year but well ahead of the Zacks Consensus Estimate of $2,647 million.
Quarterly gross margin was 30.4% well above 27.2% in the prior-year quarter.
Quarterly operating loss was $230 million compared to an operating income of
$328 million in the year-ago quarter.
Agreements of Analysts
For the fourth quarter of fiscal 2014, in the last seven days, out of the 29
estimates, 14 were revised downwards but at the same time there were seven
upward revisions of EPS estimates. Likewise, for the first quarter of fiscal
2014, out of the 25 estimates, 10 have lowered their estimates while seven
estimates moved in the opposite direction.
Currently, the Zacks Consensus EPS Estimate for the fourth quarter of fiscal
2013 is pegged at a loss of 29 cents, reflecting an annualized decline of
136.38%. Similarly, for the first quarter of fiscal 2014, the current Zacks
Consensus EPS Estimate of a loss of 16 cents indicates an year-over-year
increase of 56.54%.
We believe that stiff competition fromApple Inc.'s (Nasdaq:AAPL) iPhones
andGoogle Inc.'s (Nasdaq:GOOG) Android-based smartphones coupled with a
backdated operating system have caused downward revision of estimates.
Moreover, delay in the launch of BlackBerry 10-based smartphones coupled with
the lackluster performance of PlayBook tablets has resulted in further
decrease in estimates.
Magnitude of Estimate Revisions
During the last 7 days, the current Zacks Consensus Estimate for the fourth
quarter of fiscal 2013 was 2 cents above the loss per share of 27 cents of the
previous Zacks Consensus Estimate. Similarly, for the first quarter of fiscal
2014, the current Zacks Consensus Estimate was 3 cents above the loss per
share of 13 cents of the previous Zacks Consensus Estimate.
Likewise, for fiscal 2013, the current Zacks Consensus Estimate was 6 cents
below the loss per share of $1.24 of the earlier Zacks Consensus Estimate.
However, for fiscal 2014, in the last 7 days, the current Zacks Consensus
Estimate was 4 cents above the loss per share of 52 cents of the previous
Zacks Consensus Estimate.
Research In Motion produced an earnings surprise of 13 cents or 37.14% in the
last quarter with an average earnings surprise of a negative 150.48% in the
trailing four quarters. There are downside potentials (essentially a proxy for
future earning surprises) of 3.45% and 12.5%, respectively, for the ongoing
quarter and the next quarter. However, for fiscal 2013, the Zacks Consensus
Estimate's downside potential is 0.00% while 2014 contains a downside risk of
We maintain our long-term Neutral recommendation for Research In Motion.
Currently, it has a Zacks #3 Rank, implying a short-term Hold rating on the
S&P Wary of NYSE-ICE Merger
Immediately after the announcement of the $8.2 billion acquisition ofNYSE
Euronext Inc.(NYSE:NYX) byIntercontinentalExchange Inc.(NYSE:ICE) last
week, Standard & Poor's Ratings Services (S&P) has cast a concerned outlook on
the merger, which is expected to culminate by the first half of 2013, subject
to the fulfillment of regulatory compliances in the U.S. and Europe. The
ratings agency is skeptical about the raised debt amid weak fundamentals.
Accordingly, S&P assigned an issuer credit rating of "A+/A-1" on NYSE. The
company has also been kept under the CreditWatch with negative implications. A
CreditWatch acts as a red flag and allows a company to monitor its actions
before causing a detrimental effect on ratings.
S&P's concern hovers around NYSE's inflated debt position, which the company
plans to carry in the merged company as well. Higher debt and lower working
capital in the first half of 2012 also impelled the ratings agency to
downgrade NYSE's outlook to negative from stable, in August 2012.
Further, with a long-term debt of $2.5 billion at the end of the first nine
months of 2012, NYSE bears the brunt of higher borrowing costs, which further
constricted the operating margins to about 33% during the same period from 9%
in the year-ago period. At present, higher debt and capital expenditure has
led NYSE's debt-to-EBITDA ratio to deteriorate to 2.4x at the end of September
2012 from 1.6x at 2011-end, which again underscores ample financial and
The rating agency is wary of NYSE's liquid assets, which may hardly cover the
operating expenses for three months. At such a juncture when heavy capital
expenditure is expected until at least mid-2013, consistent dividends and
share buybacks amidst declining operating margins and operating cash flow only
augment business risks. Hence, S&P does not expect any rating upgrades over
the next two years.
The financial risks from the higher debt obligations do not make this
potentially strong merger any less risky. This is due to the fact that
IntercontinentalExchange plans to squeeze all of its cash of $1.0 billion and
raise another $1.8 billion from its revolving credit facility. This leaves the
combined entity with a debt burden of about $4.7 billion and debt-to-EBITDA
ratio of 2.2x, according to the S&P, which remains in a perilous state.
Nevertheless, the ratings agency is optimistic about ICE Clear Europe
providing clearing services to NYSE Liffe, as part of the merger. This
clearing pact allows NYSE to diminish the cost and risk of building its own
clearinghouse in London and mutually benefit from the diverse product
portfolio. Moreover, S&P believes that NYSE is making efforts to reduce its
debt obligations through refinance and other activities. Even post merger, the
joint entity has the potential to improve its operating cash flow and produce
cost synergies worth about $300 million by 2014.
However, these actions would take quite a long time given the company's
capital and other extraordinary cost requirements of about $150 million in
2013. Hence, a risky financial and operating leverage could also shake
investor confidence, and call for an appropriate check and control system
IntercontinentalExchange carries a Zacks #3 Rank, which implies a Hold rating
in the short term, while the long-term recommendation remains Neutral.
However, NYSE holds a Zacks #4 Rank, which translates into a short-term Sell
rating, while the long-term recommendation remains Underperform.
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