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Nokia (NOK) Misses Earnings and Revenue Estimates in Q1

Zacks Equity Research
Updated

Nokia Corporation’s NOK first-quarter 2018 earnings (non-IFRS) per share of €0.02 or 2 cents missed the Zacks Consensus Estimate of 3 cents. In the year-ago period, the company reported non-IFRS earnings of €0.03 per share.

Nokia Corporation Price, Consensus and EPS Surprise

 

Nokia Corporation Price, Consensus and EPS Surprise | Nokia Corporation Quote

Net sales decreased 9% year over year to €4,929 million ($6,057.3 million) and missed the Zacks Consensus Estimate of $6,271 million. The top line primarily declined due to currency woes and lower net sales in North America.

Quarterly adjusted gross margin was 39.4% compared with 40.8% a year ago. Adjusted operating margin decreased 150 basis points (bps) to 4.8% on a year-over-year basis. The margins were impacted by adverse currency fluctuations and soft market conditions in North America.

Segmental Revenues

In the Nokia Networks segment, revenues decreased 12% year over year to €4,324 million ($5,313.8 million). While net sales declined in North America, Greater China and Asia Pacific (down 27%, 15% and 13%, respectively), it increased in Latin America, Middle East & Africa and Europe (up 28%, 6% and 1%, respectively). Segmental gross margin declined 370 bps to 35.8% while operating margin decreased 560 bps to 1% in the reported quarter. The fall in segment profitability was attributable to unfavorable regional and product mix and adverse foreign currency translation.

Net sales in the Ultra Broadband Networks’ sub-group declined 17% to €1,857 million ($2,282.1 million) while that in Global Services and IP Networks and Applications fell 9% and 6%, respectively, to €1,239 million and €1,228 million ($1,522.6 million and $1,509.1 million).

Nokia Technologies segment revenues were up 48% year over year to €365 million ($448.6 million) owing to recurring sales related to licensing agreements. Segmental gross margin improved 260 bps to 97.3% while operating margin expanded significantly to 75.1% from 47%. The margins were largely driven by higher revenues and lower investments in digital media and lower litigation costs.

In the Group Common and Other segment, net sales decreased 1% to €252 million ($309.7 million) mainly due to currency woes. Segmental gross margin was 14.7%, up 410 bps, primarily led by Alcatel Submarine Networks.

Balance Sheet & Cash Flow

At quarter end, Nokia had cash and cash equivalents of €6,555 million ($8,076.2 million) while long-term debt was €3,172 million ($3,908.1 million). Cash flow from operating activities for the first three months of 2018 was €143 million ($175.7 million).

Outlook Reiterated

Nokia reiterated its earlier guidance for full-year 2018 with weakness expected in its Networks business in the first half followed by gradual improvement in market conditions and accelerated 5G rollout by the year end.
 
Zacks Rank & Stocks to Consider

Nokia currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader industry are SITO Mobile, Ltd. SITO and Cogent Communications Holdings, Inc. CCOI, both carrying a Zacks Rank #2 (Buy) and United States Cellular Corporation USM sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

SITO Mobile has long-term earnings growth expectations of 25%.

Cogent Communications has long-term earnings growth expectations of 10%.

United States Cellular Corporation has long-term earnings growth expectations of 1%. It has a positive earnings surprise history with an average of 306.5% in the trailing four quarters, beating estimates in each.

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(€1=$1.228915, period average from Jan 1, 2018 to Mar 31, 2018)


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