With millions of smartphones and tablets expected to be sold in 2011, wireless technology is hot. InterDigital, Inc. (IDCC) expects to report a strong fourth quarter on Feb 23. Shares of this Zacks #1 Rank (strong buy) have soared in the last 6 months.
InterDigital develops wireless technologies and has licenses with many of the leading wireless companies around the world.
InterDigital Surprised By 9.7% in the Third Quarter
On Oct 27, InterDigital reported its third quarter results and beat the Zacks Consensus Estimate by 7 cents. Earnings per share were 79 cents compared to the consensus of 72 cents. This was 16% higher than the third quarter of 2009.
Revenue rose 22% to $91.9 million. Patent licensing royalties climbed 18 % to $86.1 million from $73 million in third quarter of 2009. The gains were boosted by new agreements as well as growth in customers’ smartphone sales.
Its top customers in the quarter were Samsung at 28%, LG Electronics at 16% and Sharp at 11% of total sales.
Dividend To Be Started
At the end of the third quarter, InterDigital had $563.6 million in cash and other short term investments.
The company had been buying back shares but decided to institute a dividend payable in the fourth quarter in addition to continuing the buy backs.
The dividend amount has not yet been announced but it would be equal to its technology peers with similar cash hoards and business prospects.
Double Digit Earnings Growth in 2010
The 2010 Zacks Consensus Estimate has risen 3 cents to $3.74 in the last 90 days. That is earnings growth of 59%.
However, analysts are more cautious on 2011. The current Zacks Consensus Estimate calls for just $3.09 per share, which is a decline in earnings of 10.7%.
InterDigital is scheduled to report fourth quarter results on Feb 23 so we should get a better gauge then as to its 2011 outlook.
Solid Fundamentals
Despite soaring shares in the past few months, InterDigital still has attractive valuations, trading at just 15.6x forward estimates.
It also has a stellar return on equity (ROE) of 62.6%.
Shares Have Broken Out
After trading in a narrow trading range the last 2 years, and missing out of most of the stock rally, shares finally broke out in recent months and have soared to 2-year highs.
Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service. You can follow her at twitter.com/traceyryniec.
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