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What's in Store for Ericsson (ERIC) This Earnings Season?

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Ericsson (ERIC - Free Report) is scheduled to report second-quarter 2020 results on Jul 17, before the opening bell. In the last reported quarter, the company’s EPS came in line with the Zacks Consensus Estimate.

The Sweden-based telecom equipment maker is likely to have recorded lower sales volume on a year-over-year basis due to the COVID-19 crisis and related macroeconomic situation. Ericsson has estimated the second quarter to be a bit softer than normal due to the timing of strategic contracts and uncertainty induced by the pandemic.

Let’s discuss the factors that are likely to get reflected in the upcoming quarterly announcement.

Factors at Play

During the quarter under review, Ericsson inked a deal with Telenor Pakistan for the transformation of its mobile backhaul network into an IP-based infrastructure. Ericsson was selected by Erillisverkot Group, the state-run body responsible for national communications networks for public authorities and emergency services in Finland, to provide 5G core network products and solutions.

Ericsson and Magyar Telekom launched commercial 5G in Hungary, based on 5G-ready products and solutions from the EricssonRadio System. In partnership with Ericsson, GCI turned up the first 5G cell sites in Anchorage. VodafoneZiggo, a leading Dutch communications service provider, rolled out 5G with Ericsson’s Spectrum Sharing and 5G Core. Ericsson also secured a 5G contract from China Mobile, including 5G RAN and 5G core components for the second phase of its new radio rollout.

Ericsson was chosen by the Indonesian communications service provider, IndosatOoredoo, to provide AI-powered data-driven and customer-centric managed network operations through the Ericsson Operations Engine. China Telecom and China Unicom selected Ericsson as a 5G RAN vendor as part of their joint nationwide 5G network.

Swedish communications service provider, Telia Company, rolled out commercial 5G powered by Ericsson’s RAN products and solutions. SmarTone unveiled commercial 5G service across Hong Kong using Ericsson’s Spectrum Sharing technology as well as 5G Core for more efficient operations. Bell Canada selected Ericsson’s 5G RAN technology to support its 5G mobile and fixed wireless access deployment.

Ericsson was chosen by O2 UK to deploy its 5G RAN across the U.K., upgrading the existing 2G/3G/4G sites as part of a major network-modernization program. MTS Russia selected Ericsson’s MINI-LINK microwave solutions as part of the development of its converged transport network.

Ericsson’s Croatian associated company, Ericsson Nikola Tesla, was selected by Hrvatski Telekom as its sole supplier of 5G RAN products and services. Ericsson teamed up with Rogers Communications to deploy 5G across its network in Canada. Liberty Latin America chose Ericsson as its sole mobile core network vendor. Telma and Ericsson launched commercial 5G services in Madagascar.

Ericsson stretched its footprint in China through 5G deals from all three major operators. The company’s 5G business in China is likely to see healthy profitability over the life of the contracts. However, the margins are expected to have been negative during the second quarter due to high initial costs for new products.

At the end of June, Ericsson had 95 commercial 5G agreements with 41 live 5G networks in 24 countries. For the June-end quarter, the Zacks Consensus Estimate for aggregate revenues is pegged at $5,587 million, indicating a decline of 3.7% from the year-ago quarter’s reported figure. Adjusted earnings per share are pegged at 7 cents, which calls for an increase of 16.7% from the prior-year quarter’s recorded figure.

What Our Model Says

Our proven model doesn’t conclusively predict an earnings beat for Ericsson this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Ericsson’s Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is 0.00% as both are pegged at 7 cents.

Ericsson Price and EPS Surprise

Zacks Rank: Ericsson currently carries a Zacks Rank #2.

Stocks to Consider

Here are some companies that you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

State Street Corporation (STT - Free Report) is slated to release second-quarter 2020 results on Jul 17. It has an Earnings ESP of +4.11% and currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Preferred Bank (PFBC - Free Report) is scheduled to release second-quarter 2020 results on Jul 21. The company has an Earnings ESP of +13.64% and sports a Zacks Rank #1, at present.

Canadian National Railway Company (CNI - Free Report) has an Earnings ESP of +3.70% and a Zacks Rank of 2. The company is set to report second-quarter 2020 results on Jul 21.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

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