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Nokia (NOK) Misses Earnings and Revenue Estimates in Q1
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Nokia Corporation’s (NOK - Free Report) first-quarter 2017 earnings per share of €0.03 (approximately 3 cents) missed the Zacks Consensus Estimate of 4 cents. In the year-ago period, the company had reported earnings of €0.03 (3 cents) per share.
Net sales declined year over year (on a comparable combined company basis) to €5.4 billion (approximately $5.73 billion). Moreover, the top line missed the Zacks Consensus Estimate of $5.86 billion. This disappointing performance by the flagship Nokia Networks’ division was primarily due to weakness in the IP/Optical Networks and Fixed Networks subgroup.
Quarterly adjusted gross margin was 40.8% in the reported quarter compared with 39.7% a year ago. Operating margin increased 20 basis points (bps) to 6.3% on a year-over-year basis. In the first quarter, Nokia’s net cash from operating activities at the end of the quarter was -€470 million as against €510 million at the end of 2016.
Notably, this Finland-based company is rapidly expanding in the field of technology and wireless infrastructure. Additionally, it has entered into collaborations and agreements with leading names like Motorola Solutions Inc. (MSI - Free Report) and Clearfield Inc. (CLFD - Free Report) globally, despite competition. In fact, Nokia sued Apple Inc. (AAPL - Free Report) for patent infringement late last year.
Segmental Revenues
In the Nokia Networks segment, total revenue was approximately €4,902 million (around $5,223 million), down 6% year over year. The division includes Ultra Broadband Networks, and IP Networks and Applications. The decline in the Ultra Broadband Networks sub-group by 4% to €3,597 million along with reduction of 10% to €1,304 million in net sales of the IP Networks and Application, hurt the segmental sales.
Notably, net sales declined in all regions, apart from North America (7%), and Middle East and Africa (2%), which led to the segment’s below-par performance. Net sales declined by 33% in Latin America, 5% in the Asia Pacific, 3% in Greater China and 19% in Europe. Segmental gross margin improved 90 bps to 39.5% in the reported quarter. Quarterly adjusted operating margin was 6.6% compared with 6.5% a year ago.
This telecom giant recently announced the separation of the Mobile Networks unit into two organizations: Mobile Networks (focused on products and solutions) and Global Services. The reporting structure will be changed accordingly from the second quarter.
The Nokia Technologies segment’s quarterly total revenue was €247 million (approximately $263 million), up 25% year over year. Segmental gross margin was 94.7% compared with 99% in the first quarter of 2016. Operating margin contracted significantly to 47%.
In Group Common and Other segment, net sales surged 34% to €254 million (approximately $271 million). Segmental gross margin was 10.6%, down 90 basis points. This division incurred an operating loss in the quarter under review.
Nokia Corporation Price, Consensus and EPS Surprise
Nokia officially took control of rival Alcatel-Lucent in Jan 2016 and continues to expect annual cost savings of €1.2 billion in full-year 2018, excluding Nokia Technologies. For 2017, capital expenditure outlook for this Zacks Rank #4 (Sell) company is approximately €500 million. Furthermore, the view on financial income and expenses (non-IFRS) for 2017 has been revised to €250 million from €300 million. In fact, reduced expectations of net interest expenses primarily contributed to the revised expectation.
The company anticipates net sales in its primary networks division to decline in 2017, which is in line with the primary addressable market. While segmental operating margin is forecasted to be in the band of 8% to 10%, non-IFRS tax rate is expected in the range of 30% to 35% in the same year.
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Nokia (NOK) Misses Earnings and Revenue Estimates in Q1
Nokia Corporation’s (NOK - Free Report) first-quarter 2017 earnings per share of €0.03 (approximately 3 cents) missed the Zacks Consensus Estimate of 4 cents. In the year-ago period, the company had reported earnings of €0.03 (3 cents) per share.
Net sales declined year over year (on a comparable combined company basis) to €5.4 billion (approximately $5.73 billion). Moreover, the top line missed the Zacks Consensus Estimate of $5.86 billion. This disappointing performance by the flagship Nokia Networks’ division was primarily due to weakness in the IP/Optical Networks and Fixed Networks subgroup.
Quarterly adjusted gross margin was 40.8% in the reported quarter compared with 39.7% a year ago. Operating margin increased 20 basis points (bps) to 6.3% on a year-over-year basis. In the first quarter, Nokia’s net cash from operating activities at the end of the quarter was -€470 million as against €510 million at the end of 2016.
Notably, this Finland-based company is rapidly expanding in the field of technology and wireless infrastructure. Additionally, it has entered into collaborations and agreements with leading names like Motorola Solutions Inc. (MSI - Free Report) and Clearfield Inc. (CLFD - Free Report) globally, despite competition. In fact, Nokia sued Apple Inc. (AAPL - Free Report) for patent infringement late last year.
Segmental Revenues
In the Nokia Networks segment, total revenue was approximately €4,902 million (around $5,223 million), down 6% year over year. The division includes Ultra Broadband Networks, and IP Networks and Applications. The decline in the Ultra Broadband Networks sub-group by 4% to €3,597 million along with reduction of 10% to €1,304 million in net sales of the IP Networks and Application, hurt the segmental sales.
Notably, net sales declined in all regions, apart from North America (7%), and Middle East and Africa (2%), which led to the segment’s below-par performance. Net sales declined by 33% in Latin America, 5% in the Asia Pacific, 3% in Greater China and 19% in Europe. Segmental gross margin improved 90 bps to 39.5% in the reported quarter. Quarterly adjusted operating margin was 6.6% compared with 6.5% a year ago.
This telecom giant recently announced the separation of the Mobile Networks unit into two organizations: Mobile Networks (focused on products and solutions) and Global Services. The reporting structure will be changed accordingly from the second quarter.
The Nokia Technologies segment’s quarterly total revenue was €247 million (approximately $263 million), up 25% year over year. Segmental gross margin was 94.7% compared with 99% in the first quarter of 2016. Operating margin contracted significantly to 47%.
In Group Common and Other segment, net sales surged 34% to €254 million (approximately $271 million). Segmental gross margin was 10.6%, down 90 basis points. This division incurred an operating loss in the quarter under review.
Nokia Corporation Price, Consensus and EPS Surprise
Nokia Corporation Price, Consensus and EPS Surprise | Nokia Corporation Quote
Outlook
Nokia officially took control of rival Alcatel-Lucent in Jan 2016 and continues to expect annual cost savings of €1.2 billion in full-year 2018, excluding Nokia Technologies. For 2017, capital expenditure outlook for this Zacks Rank #4 (Sell) company is approximately €500 million. Furthermore, the view on financial income and expenses (non-IFRS) for 2017 has been revised to €250 million from €300 million. In fact, reduced expectations of net interest expenses primarily contributed to the revised expectation.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The company anticipates net sales in its primary networks division to decline in 2017, which is in line with the primary addressable market. While segmental operating margin is forecasted to be in the band of 8% to 10%, non-IFRS tax rate is expected in the range of 30% to 35% in the same year.
The Best & Worst of Zacks
Today you are invited to download the full, up-to-the-minute list of 220 Zacks Rank #1 "Strong Buys" free of charge. From 1988 through 2015 this list has averaged a stellar gain of +25% per year. Plus, you may download 220 Zacks Rank #5 "Strong Sells." Even though this list holds many stocks that seem to be solid, it has historically performed 6X worse than the market. See these critical buys and sells free >>