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Nokia's (NOK) Q2 Earnings In Line, Revenues Decline Y/Y
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Nokia Corporation (NOK - Free Report) reported lackluster financial results for second-quarter 2018 with year-over-year decrease in both top- and bottom-line numbers.
Net Income
Non-IFRS income for the reported quarter decreased 68% year over year to €144 million or €0.03 per share ($171.7 million or 4 cents per share), primarily due to sales decline in all three operating segments. The figure came in line with the Zacks Consensus Estimate of 4 cents.
Nokia Corporation Price, Consensus and EPS Surprise
Quarterly non-IFRS net sales decreased 6% year over year to €5,318 million ($6,339 million). The top line, however, surpassed the Zacks Consensus Estimate of $6,084 million.
Operating Metrics
Non-IFRS gross profit decreased 13% year over year to €2,038 million ($2,429.9 million). Non-IFRS gross margin was 38.3%, down 340 basis points (bps).
Segmental Performance
In Nokia Networks segment, revenues decreased 6% year over year to €4,693 million ($5,595.4 million). While net sales declined in Asia-Pacific, Europe, Greater China and North America (down 10%, 5%, 17% and 2%, respectively), it increased in Middle East & Africa (up 3%). Latin America’s tally was almost same as that of the year-ago quarter.
Segmental gross margin declined 430 bps to 34.8% mainly due to lower net sales. Operating margin decreased 670 bps to 1.5% in the reported quarter due to unfavorable regional and product mix and adverse foreign currency translation. Net sales in the Ultra Broadband Networks’ sub-group declined 5% year over year to €2,055 million ($2,450.1 million) while the same in Global Services and, IP Networks and Applications fell 8% and 3%, respectively, to €1,326 million and €1,313 million ($1,581 million and $1,565.5 million).
Nokia Technologies segment revenues were down 2% year over year to €361 million ($430.4 million), primarily due to the absence of approximately €70 million of non-recurring licensing net sales, which benefited the second quarter of 2017.
Segmental gross margin improved 270 bps to 98.1% while operating margin expanded significantly to 80.9% from 62.3%.
In the Group Common and Other segment, net sales decreased 9% year over year to €278 million ($331.5 million) primarily due to Alcatel Submarine Networks. The decrease in Alcatel Submarine Networks was due to the completion of two large projects, which benefited the second-quarter 2017. Segmental gross margin was 19.1%, up 150 bps.
Cash Flow and Balance Sheet
For the first six months of 2018, Nokia utilized €944 million of cash in operations against cash generation of €565 million in the year-ago period.
As on Jun 30, 2018, Nokia had cash and cash equivalents of €4,993 million ($5,832.1 million) while long-term interest-bearing liabilities were €2,771 million ($3,236.7 million).
During the reported quarter, net cash and current financial investments decreased approximately €2 billion. This was due to the payment of the dividend of approximately €940 million and the payment of employee incentives related to the company’s business performance in 2017.
Outlook Reiterated
Nokia reiterated its earlier guidance for full-year 2018 and remains on target to deliver €1.2 billion of recurring annual cost savings for the year. The company expects gradual improvement in market conditions in second half of 2018, with particular acceleration in the fourth quarter in North America in its Networks business and accelerated 5G rollout by the year end.
Zacks Rank & Stocks to Consider
Nokia currently has a Zacks Rank #3 (Hold). Better-ranked stocks in the broader industry include Comtech Telecommunications Corp. (CMTL - Free Report) , Micron Technology, Inc. (MU - Free Report) and Motorola Solutions, Inc. (MSI - Free Report) . While Comtech and Micron sport a Zacks Rank #1 (Strong Buy), Motorola carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Comtech has a long-term earnings growth expectation of 5%. It beat earnings estimates in each of the trailing four quarters, the average being 123.7%.
Micron has a long-term earnings growth expectation of 8.2%. It beat earnings estimates in each of the trailing four quarters, the average being 5.9%.
Motorola has a long-term earnings growth expectation of 8.5%. It beat earnings estimates in each of the trailing four quarters, the average being 12.1%.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
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Nokia's (NOK) Q2 Earnings In Line, Revenues Decline Y/Y
Nokia Corporation (NOK - Free Report) reported lackluster financial results for second-quarter 2018 with year-over-year decrease in both top- and bottom-line numbers.
Net Income
Non-IFRS income for the reported quarter decreased 68% year over year to €144 million or €0.03 per share ($171.7 million or 4 cents per share), primarily due to sales decline in all three operating segments. The figure came in line with the Zacks Consensus Estimate of 4 cents.
Nokia Corporation Price, Consensus and EPS Surprise
Nokia Corporation Price, Consensus and EPS Surprise | Nokia Corporation Quote
Revenues
Quarterly non-IFRS net sales decreased 6% year over year to €5,318 million ($6,339 million). The top line, however, surpassed the Zacks Consensus Estimate of $6,084 million.
Operating Metrics
Non-IFRS gross profit decreased 13% year over year to €2,038 million ($2,429.9 million). Non-IFRS gross margin was 38.3%, down 340 basis points (bps).
Segmental Performance
In Nokia Networks segment, revenues decreased 6% year over year to €4,693 million ($5,595.4 million). While net sales declined in Asia-Pacific, Europe, Greater China and North America (down 10%, 5%, 17% and 2%, respectively), it increased in Middle East & Africa (up 3%). Latin America’s tally was almost same as that of the year-ago quarter.
Segmental gross margin declined 430 bps to 34.8% mainly due to lower net sales. Operating margin decreased 670 bps to 1.5% in the reported quarter due to unfavorable regional and product mix and adverse foreign currency translation. Net sales in the Ultra Broadband Networks’ sub-group declined 5% year over year to €2,055 million ($2,450.1 million) while the same in Global Services and, IP Networks and Applications fell 8% and 3%, respectively, to €1,326 million and €1,313 million ($1,581 million and $1,565.5 million).
Nokia Technologies segment revenues were down 2% year over year to €361 million ($430.4 million), primarily due to the absence of approximately €70 million of non-recurring licensing net sales, which benefited the second quarter of 2017.
Segmental gross margin improved 270 bps to 98.1% while operating margin expanded significantly to 80.9% from 62.3%.
In the Group Common and Other segment, net sales decreased 9% year over year to €278 million ($331.5 million) primarily due to Alcatel Submarine Networks. The decrease in Alcatel Submarine Networks was due to the completion of two large projects, which benefited the second-quarter 2017. Segmental gross margin was 19.1%, up 150 bps.
Cash Flow and Balance Sheet
For the first six months of 2018, Nokia utilized €944 million of cash in operations against cash generation of €565 million in the year-ago period.
As on Jun 30, 2018, Nokia had cash and cash equivalents of €4,993 million ($5,832.1 million) while long-term interest-bearing liabilities were €2,771 million ($3,236.7 million).
During the reported quarter, net cash and current financial investments decreased approximately €2 billion. This was due to the payment of the dividend of approximately €940 million and the payment of employee incentives related to the company’s business performance in 2017.
Outlook Reiterated
Nokia reiterated its earlier guidance for full-year 2018 and remains on target to deliver €1.2 billion of recurring annual cost savings for the year. The company expects gradual improvement in market conditions in second half of 2018, with particular acceleration in the fourth quarter in North America in its Networks business and accelerated 5G rollout by the year end.
Zacks Rank & Stocks to Consider
Nokia currently has a Zacks Rank #3 (Hold). Better-ranked stocks in the broader industry include Comtech Telecommunications Corp. (CMTL - Free Report) , Micron Technology, Inc. (MU - Free Report) and Motorola Solutions, Inc. (MSI - Free Report) . While Comtech and Micron sport a Zacks Rank #1 (Strong Buy), Motorola carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Comtech has a long-term earnings growth expectation of 5%. It beat earnings estimates in each of the trailing four quarters, the average being 123.7%.
Micron has a long-term earnings growth expectation of 8.2%. It beat earnings estimates in each of the trailing four quarters, the average being 5.9%.
Motorola has a long-term earnings growth expectation of 8.5%. It beat earnings estimates in each of the trailing four quarters, the average being 12.1%.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>
€1 = $1.192279 (Period average from Apr 1, 2018 to Jun 30, 2018)
€1 = $1.168060 (As on Jun 30, 2018)