Back to top

Can Ericsson (ERIC) Surprise This Earnings Season?

Read MoreHide Full Article

Ericsson (ERIC - Free Report) is set to report second-quarter 2014 results on Jul 18. Last quarter, it posted a 6.67% negative surprise. Let’s see how things are shaping up for this announcement.

Factors Influencing This Quarter

Ericsson is the world’s largest supplier of LTE technology with approximately 13% market share and has established more than 150 LTE networks worldwide. The company’s services are in demand by operators to expand network coverage and to upgrade networks driven by the rising demand for higher speed and capacity networks.

Recently, Ericsson pulled off the feat of attaining high speed 5 Gbps on a live network, while demonstrating its pre-standard 5G network technology. Though, 5G networks are expected to take a few more years to be available commercially, this achievement is phenomenal for Ericsson. The high speed 5G network is of significant importance to the telecom sector as it will not only meet the exponentially increasing demand but will also be crucial for the next-generation machine-to-machine applications.

Further, Ericsson has been making efforts to strengthen its foothold in the broadcasting and media industry. To meet the growing demand, the company is constructing a new campus in Silicon Valley, which is expected to house about 2,000 employees devoted to research and development in IP, TV and Media, SDN, NFV and mobile innovation. Recently, Ericsson completed the acquisition of U.K.-based media company Red Bee Media. In June, the company also received a contract from T-Mobile U.S. Inc. for upgrading the business and IT billing processes via its OSS/BSS software. This will enable T-Mobile to deploy advanced IMS, IPTV, web services to their customers.

However, the recent unrest in Ukraine and Russia might affect its business adversely given that the company derives a significant portion of the revenues from business in these regions.

Earnings Whispers?

Our proven model does not conclusively show that Ericsson is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Earnings ESP:  The earning ESP stands at 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 14 cents.

Zacks Rank: Ericsson has a Zacks Rank #3 (Hold) but we need to have a positive ESP to be confident about an earnings surprise.  We caution against stocks with Zacks Ranks #4 and #5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

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:  

Arch Capital Group Ltd. (ACGL - Free Report) , with Earnings ESP of +6.32% and a Zacks Rank #1 (Strong Buy).

W.R. Berkley Corporation (WRB - Free Report) , with Earnings ESP of +2.41% and a Zacks Rank #1.

Infosys Ltd. (INFY - Free Report) , with Earnings ESP of +1.24% and a Zacks Rank #2 (Buy).

More from Zacks Analyst Blog

You May Like