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Will Higher Revenues Aid Ericsson's (ERIC) Earnings in Q4?

Zacks Equity Research
·4-min read

Ericsson ERIC is scheduled to report fourth-quarter 2020 results on Jan 29, before the opening bell. In the last reported quarter, the company delivered a positive earnings surprise of 25%. The bottom line surpassed the Zacks Consensus Estimate by 4 cents.

The Sweden-based telecom equipment provider is expected to have recorded higher aggregate revenues year over year. The performance can be attributed to strong 5G momentum, with several deal wins from communications service providers globally.

Factors at Play

During the quarter under review, Ericsson and Bharti Airtel (India’s largest integrated communications service provider) strengthened their long-standing partnership with a new multi-year contract to deploy 5G-ready radio and transport solutions from the former. Airtel Africa expanded its partnership with Ericsson to enable 4G coverage in Kenya.

Proximus selected Ericsson to implement a new 5G core network on the Belgian operator’s cloud infrastructure. The company was chosen by Dutch communications service provider, KPN, as its mobile core network vendor.

Ericsson and POST Luxembourg strengthened their partnership with a multi-year deal to deploy 5G core and 5G Radio Access Network (RAN) in Luxembourg. Ericsson introduced Cloud RAN — an offering to enable communications service providers to add greater flexibility to their networks.

The company completed the acquisition of Cradlepoint, the U.S.-based market leader in Wireless WAN Edge 4G and 5G solutions for the enterprise market. Ericsson and CETIN, a telecom infrastructure company, inked a deal to bring 5G to the Czech Republic. Etisalat, a leading telecommunications operator in emerging markets, selected Ericsson to implement its advanced 5G radio and 5G core network.

Russian communications service provider, Mobile TeleSystems, deployed an Ericsson-powered 5G-ready network for gold and silver producer, Polymetal, at the Nezhdaninskoye gold deposit in Yakutia. The company was selected by WIND Hellas as its mobile core network vendor for standalone and non-standalone 5G in Greece.

Japan’s KDDI selected Ericsson to deploy cloud-native, dual-mode 5G core, enabling the launch of 5G standalone services in its network. Indonesian communications service provider, Indosat Ooredoo, selected Ericsson’s digital monetization platform business support systems’ solution. In Slovakia, it was chosen by Slovak Telekom to deliver its 5G RAN and switch on 5G commercial services.

Ericsson and Singtel announced the acceleration of their 5G partnership in Singapore through the deployment of high-end 5G technology. At the end of 2020, Ericsson had 122 commercial 5G agreements with communications service providers, including 68 publicly announced 5G contracts. It had 77 live 5G networks in 40 countries. These notable developments are likely to have had a positive impact on the company’s top line.

For the December quarter, the Zacks Consensus Estimate for revenues is pegged at $7,418 million, indicating growth of 7.4% from the year-ago quarter’s reported figure. Adjusted earnings per share are pegged at 21 cents, which suggests an increase of 40%.

What Our Model Says

Our proven model doesn’t predict an earnings beat for Ericsson this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Ericsson’s Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is 0.00% as both are pegged at 21 cents.

Ericsson Price and EPS Surprise

Ericsson Price and EPS Surprise
Ericsson Price and EPS Surprise

Ericsson price-eps-surprise | Ericsson Quote

Zacks Rank: Ericsson currently has a Zacks Rank #4 (Sell).

Stocks to Consider

Here are some companies that you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Weyerhaeuser Company WY is slated to release fourth-quarter 2020 results on Jan 29. It has an Earnings ESP of +5.64% and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

LyondellBasell Industries N.V. LYB is scheduled to release fourth-quarter 2020 results on Jan 29. The company has an Earnings ESP of +3.40% and carries a Zacks Rank #2.

Chevron Corporation CVX has an Earnings ESP of +11.71% and a Zacks Rank of 3. The company is set to report fourth-quarter 2020 results on Jan 29.

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