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Nokia (NOK) Q4 Earnings & Revenues Beat Estimates, Down Y/Y

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Nokia Corporation (NOK - Free Report) reported decent fourth-quarter 2020 results, wherein the top and the bottom lines beat the respective Zacks Consensus Estimate.

Bottom Line

Reported loss (from continuing operations) in the quarter was €2,608 million or loss of €0.46 per share against profit of €563 million or €0.10 per share in the year-ago quarter. The deterioration was primarily due to a net negative fluctuation in income taxes and lower operating profit.

In 2020, reported loss was €2,421 million against profit of €18 million in 2019.

Quarterly non-IFRS profit came in at €811 million ($967.1 million) or €0.14 (17 cents) per share compared with €821 million or €0.15 per share in the prior-year quarter. The bottom line beat the Zacks Consensus Estimate by 5 cents, delivering a surprise of 41.7%.

Nokia Corporation Price, Consensus and EPS Surprise Nokia Corporation Price, Consensus and EPS Surprise

Nokia Corporation price-consensus-eps-surprise-chart | Nokia Corporation Quote

Top Line

On a reported basis, net sales in the quarter declined 4.9% year over year to €6,568 million. This was primarily due to lower sales in Mobile Access.

Net sales declined in four out of the six regions on a year-over-year basis — Asia-Pacific, Greater China, Latin America and Middle East & Africa (down 20%, 10%, 38% and 10%, respectively). The same grew 11% in North America. Net sales in Europe remained flat.

In 2020, net sales fell 6.3% year over year to €21,870 million.

Quarterly non-IFRS net sales were €6,569 million ($7,833.7 million) compared with €6,903 million in the prior-year quarter. The top line surpassed the consensus estimate of $7,556 million.

Quarterly Segment Results

Networks sales (which accounts for the lion’s share of total revenues) fell 7.3% year over year to €5,040 million. This was primarily due to Mobile Access and Optical Networks. The decrease in Mobile Access was due to network deployment and planning services. The net sales performance in Optical Networks was in comparison to a particularly strong prior-year quarter. The segment’s gross margin surged 280 basis points (bps) to 37%. Operating margin decreased 170 bps to 10.6%.

Nokia Software sales were down 0.7% year over year to €864 million. This was due to Asia-Pacific, Europe, Latin America and Greater China, partly offset by a strong performance in North America. The segment’s gross margin fell 290 bps to 56.8%. Operating margin declined 410 bps to 30.8%.

Nokia Technologies sales improved 26.4% year over year to €292 million. This was driven by higher patent licensing and catch-up sales due to a renewed patent license agreement. The segment’s gross margin improved 30 bps to 99.5%. Operating margin fell 210 bps to 83%.

Group Common and Other sales improved 16.5% year over year to €275 million, primarily driven by Alcatel Submarine Networks. Growth in Alcatel Submarine Networks was driven by strong demand following COVID-19-related factory closures in the first half of 2020. The segment’s gross margin was 3.8%, up 30 bps.

Other Details

Overall, non-IFRS cost of sales decreased to €3,824 million from €4,144 million in the year-ago quarter. Non-IFRS gross profit declined 0.5% to €2,745 million. Non-IFRS operating profit was €1,090 million compared with €1,134 million in the year-ago quarter.

Cash Flow & Liquidity

In 2020, Nokia generated €1,759 million of net cash from operating activities compared with €390 million in 2019.

As of Dec 31, 2020, the company had €6,940 million ($8,511 million) in cash and cash equivalents with €5,015 million ($6,150.3 million) of long-term interest-bearing liabilities. This compares with the respective tallies of €5,910 million and €3,985 million a year ago.

2021 Outlook

For 2021, Nokia expects non-IFRS net sales between €20.6 billion and €21.8 billion. The company expects a non-IFRS operating margin of 7-10%. It intends to provide long-term outlook, latest at Capital Markets Day on Mar 18, 2021.

Zacks Rank & Stocks to Consider

Nokia currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader industry are Airgain (AIRG - Free Report) , Knowles (KN - Free Report) and U.S. Cellular (USM - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Airgain delivered a trailing four-quarter positive earnings surprise of 62.5%, on average. The company’s earnings beat the Zacks Consensus Estimate in three of the last four quarters.

Knowles delivered a trailing four-quarter positive earnings surprise of 12.5%, on average.

U.S. Cellular delivered a trailing four-quarter positive earnings surprise of 231.1%, on average.

Conversion rate used:

€1 = $1.192521 (period average from Oct 1, 2020 to Dec 31, 2020)

€1 = $1.226373 (as of Dec 31, 2020)

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