InterDigital, Inc. IDCC recently offered revenue guidance for third-quarter 2020. The outlook offers clarity regarding its business operations, despite coronavirus-induced turmoil that shook the global financial markets, and is likely to instill investors’ confidence in the stock.
Management currently expects third-quarter revenues between $83 million and $88 million, reflecting the operating leverage of the company’s business model. The Zacks Consensus Estimate for revenues is pegged at $85.39 million.
Notably, InterDigital reported solid second-quarter 2020 results, wherein both top and bottom lines surpassed the respective Zacks Consensus Estimate. The company reported a net income of $22.3 million or 72 cents per share compared with $7.7 million or 24 cents in the year-ago quarter. The three-fold rise in year-over-year earnings was largely attributable to top-line growth. The wireless R&D company’s revenues totaled $104.5 million, up from $75.6 million in the year-earlier quarter. The double-digit growth amid the challenging macroeconomic environment was primarily driven by the new fixed-fee patent license agreement signed during the quarter with China-based telecom equipment manufacturer, Huawei.
InterDigital’s commitment to licensing its broad portfolio of technologies to wireless terminal equipment makers, which allows it to expand its core market capability, is laudable. The company has leading companies, such as Huawei, Samsung, LG and Apple, under its licensing agreement. Consequently, it expects to generate healthy revenues from patent licensing in the forthcoming quarters as well.
InterDigital’s global footprint, diversified product portfolio and the ability to penetrate different markets are impressive. Apart from the company’s strong portfolio of wireless technology solutions, the addition of technologies related to sensors, user interface and video to its offerings is likely to drive significant value, considering the massive size of the market it licenses. Furthermore, the company remains committed to pursuing acquisitions in order to drive its product portfolio and boost organic growth.
The stock has gained 30% over the past year compared with the industry’s growth of 28.8%.
InterDigital currently carries a Zacks Rank #5 (Strong Sell).
Some better-ranked stocks in the industry are Clearfield, Inc. CLFD, Motorola Solutions, Inc. MSI and Qualcomm Incorporated QCOM, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Clearfield delivered an earnings surprise of 45.6%, on average, in the trailing four quarters.
Motorola has a long-term earnings growth expectation of 9%. It delivered an earnings surprise of 11.1%, on average, in the trailing four quarters.
Qualcomm has a long-term earnings growth expectation of 19.8%. It delivered an earnings surprise of 14.3%, on average, in the trailing four quarters.
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