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Despite posting a 25% positive surprise in the third quarter, Nokia failed to improve its top and bottom line results compared to the last year as its Windows-based smartphone Lumia failed to generate any meaningful market traction.
Factors to be Considered this Quarter
Things are, however, looking better in the current quarter as the company expects significant improvement in its Device and Service segment based on the good show by its flagship Lumia and low-end smartphone Asha.
The company reported in its preliminary report that it sold 4.4 million Lumia devices against 2.9 million units in the previous quarter, marking a sequential growth of nearly 52%. Nokia also sold 9.3 million units of Asha range of handsets in the fourth quarter, far better than 6.5 million handsets sold in the previous quarter, thereby posting an impressive sequential growth of about 43%.
It appears that the company’s decision to develop Windows-based phones has started showing positive signs as the large screen Lumia 920 with some great imaging and mapping feature is attracting more customers. Gaining significant market traction in the emerging market is primarily attributable for the good results from Asha.
Unlike the third quarter, Nokia’s activities in the fourth quarter were enough to win analysts’ confidence. The Zacks Consensus Estimate for the fourth quarter has improved in the last seven days from a negative earnings estimate of 1 cent to a current estimate of break even earnings.
Our proven model does not conclusively show that Nokia Corporation is likely to beat the Zacks Consensus Estimate in the fourth quarter. That is because a stock needs to have both a positive Earnings ESP (Read: Zacks Earnings ESP: A Better Method) and a Zacks Rank #1 (Strong Buy) or at least Zacks Rank #2 (Buy) or Zacks Rank #3 (Hold) for this to happen. Unfortunately this is not the case here as elaborated below.
Break Even Zacks ESP: This is because the Most Accurate estimate stands at $0.04 while the Zacks Consensus is lower at $0.00. This leads to a break even ESP for Nokia.
Zacks Rank #1 (Strong Buy): Nokia’s Zacks Rank of 1, however, increases the predictive power of ESP. That said we also need to have a positive ESP to be confident for an earnings surprise call.
Other Stocks to Consider
Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
However, creating a niche for itself amid a crowded smartphone market remains the biggest challenge for the Finnish handset manufacturer.
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