Yahoo Finance Nokia's (NOK) Q1 Earnings Misses Estimates, Revenues Rise Y/Y
Nokia Corporation NOK reported mixed first-quarter 2023 results, with the top line beating the Zacks Consensus Estimate but the bottom line missing the same. Sales decline in Nokia Technologies was more than offset by growth in Network Infrastructure, Mobile Networks and 5G deployments in India.
Net Income
Nokia registered a net profit of €289 million ($310 million) or €0.05 (5 cents) per share in the first quarter of 2023 compared with €219 million or €0.04 per share in the year-ago quarter.
Comparable profit came in at €342 million ($366.9 million) or €0.06 (6 cents) per share, down from €416 million or €0.07 per share in the year-ago quarter. Higher income tax expenses combined with higher research and development and administrative costs affected the bottom line. The bottom line missed the Zacks Consensus Estimate of 9 cents.
Nokia Corporation Price, Consensus and EPS Surprise
Nokia Corporation price-consensus-eps-surprise-chart | Nokia Corporation Quote
Revenues
Total revenues in first-quarter fiscal 2023 rose to €5,859 million ($6,285 million), up 10% year over year. Solid growth in the Mobile Network segment, driven by 5G deployments in India and significant rise in Optical Networks and IP Networks sales, boosted the top line. Revenues beat the Zacks Consensus Estimate of $6,038 million.
Segment Results
Network Infrastructure revenues totaled €2,248 million ($2,411 million), up 14% on a reported basis and 13% on a constant-currency (cc) basis. At cc, the IP Networks witnessed a 13% growth and Optical Networks surged 45%. Robust enterprise sales growth in North America and strong performance in Asia Pacific and India supported the top line from this segment. Submarine Network sales grew by 11% at cc due to webscale-driven project deployments.
Mobile Networks contributed €2,567 million ($2,753.7 million) to the total revenues, registering 13% year-over-year growth on a reported basis and 13% at cc. Substantial 5G deployments in India and market share gain in Europe, the Middle East and Africa spurted the net sales from this segment. Regional mix affected the operating margin as it declined to 5.3% from 7.5% in the prior-year quarter.
The company generated €760 million ($815.3 million) in sales from Cloud and Network Services, up 3% year over year on a reported basis. The segment benefitted from growth in Enterprise Solutions backed by positive momentum in campus wireless. However, the decline in Business Applications and Cloud and Cognitive Services partially offset the revenue growth.
Nokia Technologies accounted for €242 million ($259.6 million), decreasing 21% on a reported basis and 22% at cc. A long-term licensee exercised an option in fourth-quarter 2022 due to which all the outstanding revenues from this segment were recognized in the previous quarter and no longer included in 2023 figures. Decreasing market share of a smartphone vendor and lower brand licensing revenues also contributed to the decline of this segment.
Region wise, net sales skyrocketed 327% on a reported basis in India, due to the rapid deployment of 5G and growth in Optical Networks and IP Networks. Europe witnessed revenue growth of 5% on a reported basis. However, a decline in Nokia Technologies partially offset the gain from other verticals in Europe. North America saw a decline of 9% on a reported basis due to net sales reduction in the Mobile Network segment and inventory adjustments. Growth in Cloud and Network Services and Network Infrastructure partially compensated for this negative trend. Falling revenues in Mobile Networks and Cloud and Network Services in Japan dented overall performance in Asia Pacific as the region saw a 9% decline in revenues on a reported basis. Net sales fell by 14% in Greater China due to a decline in Mobile Networks.
Other Details
In the first quarter of 2023, the gross margin declined to 37.5% from 40.6% in the prior year. Declining net sales in Nokia Technologies and the negative impact of the regional mix in Mobile Networks led to lower gross margins. The company’s operating profit improved to €426 million ($457 million) from €354 million.
Cash Flow and Liquidity
Nokia generated €83 million ($89 million) net cash from operating activities in the first quarter of 2023. As of Mar 31, 2023, the company had €4,827 million ($5,250.3 million) cash and cash equivalents with long-term interest-bearing liabilities of €3,704 million ($4,028.9 million).
Outlook
For 2023, the company anticipates net sales to increase by 2% to 8% at cc to €24.6-€26.2 billion. Management expects the comparable operating margin to be in the range of 11.5-14%. Capital expenditures are estimated to be about €700 million.
Zacks Rank & Stocks to Consider
Nokia currently carries a Zacks Rank #3 (Hold). You can the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Arista Networks, Inc. ANET, carrying a Zacks Rank #2 (Buy), delivered an earnings surprise of 14.17%, on average, in the trailing four quarters. Earnings estimates for ANET for the current year stand at $5.83 per share. Arista provides cloud networking solutions for data centers and cloud computing environments. The company offers 10/25/40/50/100 Gigabit Ethernet switches and routers optimized for next-generation data center networks.
It continues to benefit from strong momentum and diversification across its top verticals and product lines. The company has a software-driven, data-centric approach to help customers build their cloud architecture and enhance their cloud experience. It is well-poised for growth in data-driven cloud networking business with proactive platforms and predictive operations. Arista has introduced network observability software, DANZ Monitoring Fabric (DMF), on its switching platforms for enterprise-wide traffic visibility and contextual insights.
Juniper Networks, Inc. JNPR, carrying a Zacks Rank #2, delivered an earnings surprise of 1.55%, on average, in the trailing four quarters. It is witnessing strong momentum across its core industry verticals and is confident of its long-term prospects. Investments in customer solutions and sales organizations have enabled the company to capitalize on the solid demand across end markets.
Juniper is a leading provider of networking solutions and communication devices. The company develops, designs and sells products that help build a network infrastructure for services and applications based on a single Internet protocol network worldwide. The company caters to the networking needs of enterprises, public sector organizations and service providers across the globe.
Splunk Inc. SPLK, sporting a Zacks Rank #1, delivered an earnings surprise of 131.1%, on average, in the trailing four quarters. In the last reported quarter, it delivered an earnings surprise of 83.78%. Splunk provides software solutions that enable enterprises to gain real-time operational intelligence by harnessing the value of their data. The company's offerings enable users to investigate, monitor, analyze and act on machine data and big data, irrespective of format or source and help in operational decision-making.
Its software has a broad range of applications, including security analytics, business analytics and IT operations. Splunk is benefiting from healthy customer engagement, evident from the consistently high net retention and competitive win rates alongside solid momentum with large orders overall.
Note: €1 = $1.072720 (period average from Jan 1, 2023, to Mar 31, 2023)
€1 = $1.087706 (as of Mar 31, 2023)
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