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Nokia's (NOK) Q2 Earnings Miss Estimates, Revenues Fall Y/Y
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Nokia Corporation (NOK - Free Report) reported soft second-quarter 2023 results, with the top and bottom lines missing the respective Zacks Consensus Estimate. Declining trends in Network Infrastructure, owing to weakness in IP Networks, Submarine Networks and sluggish demand in North America affected the net sales. Despite these challenges, the ongoing 5G deployments in India and favorable momentum in the European market cushioned the top line.
Net Income
Nokia generated a net profit of €289 million ($314.6 million) or €0.05 (5 cents) per share in the second quarter of 2023, down from €460 million or €0.08 per share in the year-ago quarter.
Comparable profit stood at €414 million ($450.6 million) or €0.07 (8 cents) per share compared with €585 million or €0.10 per share in the year-ago quarter. The decline is primarily attributable to lower revenues and higher income tax expenses. The bottom line missed the Zacks Consensus Estimate of 9 cents.
Nokia Corporation Price, Consensus and EPS Surprise
Total revenues in the second quarter of 2023 were €5,710 million ($6,215.3 million), down 3% from €5,873 million in the year-ago quarter. Demand softness in Network Infrastructure, Cloud and Network Services vertical hindered the top line during the quarter. Revenues fell short of the Zacks Consensus Estimate of $6,269 million.
Segment Results
Net sales from Network Infrastructure totaled €1,978 million ($2,153 million), down 8% on a reported basis and 6% on a constant-currency (cc) basis. At cc, the IP Networks registered an 11% decline while Optical Networks surged 16%. Fixed Networks also witnessed a decline of 14% year over year due to demand softness in North America. At cc, revenues from Submarine Networks were down 5% year over year. The top line fell short of our revenue estimate of €2,144 million.
Mobile Networks registered revenues of €2,623 million ($2,855.1 million), up 1% year over year on a reported basis and 5% at cc. Net sales surpassed our revenue estimate of €2,531.9 million. Market share gain in Europe and rapid 5G deployment in India boosted the top line in this segment. However, inventory adjustments and a cautious spending environment in North America partially reversed this benefit. Regional mix affected the operating margin as it fell to 7.9% from 11.2% in the prior-year quarter.
Cloud and Network Services contributed €742 million ($807.7 million), down 1% year over year on a reported basis but up 2% on a cc basis. At cc, the decline in Business Applications, Cloud and Cognitive Services dented the revenues in this vertical. Strength in Core Networks and Enterprise Solutions supported the top line.
Nokia Technologies accounted for €334 million ($363.6 million), registering growth of 10% on both a reported basis and cc basis. Net sales growth is mainly driven by several new licensing agreements signed during the second quarter.
Region-wise, net sales from India witnessed a substantial improvement of 333% year over year on a reported basis to €1,043 million. Accelerated 5G deployments and growth in Optical Networks are the key drivers behind this increase. Europe registered a revenue growth of 11% on a reported basis to €1,523 million, driven by healthy traction in Mobile Networks, strength in IP Networks and Fixed Networks.
North America saw a 42% decline on a reported basis to €1,293 million, owing to inventory adjustments and constrained spending behavior from customers. Net sales decreased 18% to €344 million in Greater China due to a decline in Mobile Networks and Network Infrastructure. Revenues from the Asia Pacific region fell 8% year over year to €527 million, owing to declining trends in Mobile Networks, Network Infrastructure, Cloud and Network Services.
Other Details
In the second quarter of 2023, the comparable gross margin declined to 38.8% from 40.6% in the prior-year quarter, primarily due to the negative impact of the regional mix in Mobile Networks. Growth in Nokia Technologies and a strong margin in Network Infrastructure partially offset this.
Cash Flow and Liquidity
Nokia utilized €333 million ($362.5 million) net cash for operating activities in the second quarter of 2023. As of Jun 30, 2023, the company had €5,106 million ($5,557.6 million) in cash and cash equivalents, with long-term interest-bearing liabilities of €3,584 million ($3,901.1 million). By Jun 30, 2023, the company repurchased around 40 million shares at an average price of approximately €4.14.
Outlook
For 2023, the company estimates revenues to be within the range of €23.2-€24.6 billion. The comparable operating margin is projected in the range of 11.5-13%. Free cash flow is expected to be within 20-50% of comparable operating profit. Capital expenditure is estimated to be €700 million. The comparable income tax rate is expected to be 25%.
Zacks Rank & Stocks to Consider
Nokia currently carries a Zacks Rank #4 (Sell).
InterDigital, Inc. (IDCC - Free Report) , sporting a Zacks Rank #1 (Strong Buy), delivered an earnings surprise of 170.89%, on average, in the trailing four quarters. In the last reported quarter, it pulled off an earnings surprise of 579.03%. You can see the complete list of today’s Zacks #1 Rank stocks here.
It is a pioneer in advanced mobile technologies that enable wireless communications and capabilities. The company designs and develops a wide range of advanced technology solutions, which are used in digital cellular and wireless 3G, 4G and IEEE 802-related products and networks.
Akamai Technologies, Inc. (AKAM - Free Report) , carrying a Zacks Rank #2 (Buy) at present, delivered an earnings surprise of 4.86%, on average, in the trailing four quarters. In the last reported quarter, it pulled off an earnings surprise of 6.06%.
It is a global provider of content delivery networks and cloud infrastructure services. The company’s solutions accelerate and improve the delivery of content over the Internet, enabling faster response to requests for web pages, streaming of video & audio, business applications, etc. Its offerings are intended to reduce the impact of traffic congestion, bandwidth constraints and capacity limitations on customers.
Viasat, Inc. (VSAT - Free Report) , currently sporting a Zacks Rank #1, delivered an earnings surprise of 7.98%, in the last reported quarter. Viasat designs, develops and markets advanced digital satellite telecommunications and other wireless networking and signal processing equipment. The company serves its high-bandwidth, high-performance communications solutions to the public, as well as military, enterprises and government enterprises.
Viasat provides broadband services named ‘Exede’ in North America. This features the world's highest capacity satellite, ViaSat-1; satellite broadband networking systems, global mobile satellite services comprising high-speed in-flight Internet, as well as global tracking and messaging; and Wi-Fi and other hotspot support, operations and management systems.
Note: €1 = $1.08849 (period average from Apr 1, 2023, to Jun 30, 2023) €1 = $1.08844 (as of Jun 30, 2023)
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Nokia's (NOK) Q2 Earnings Miss Estimates, Revenues Fall Y/Y
Nokia Corporation (NOK - Free Report) reported soft second-quarter 2023 results, with the top and bottom lines missing the respective Zacks Consensus Estimate. Declining trends in Network Infrastructure, owing to weakness in IP Networks, Submarine Networks and sluggish demand in North America affected the net sales. Despite these challenges, the ongoing 5G deployments in India and favorable momentum in the European market cushioned the top line.
Net Income
Nokia generated a net profit of €289 million ($314.6 million) or €0.05 (5 cents) per share in the second quarter of 2023, down from €460 million or €0.08 per share in the year-ago quarter.
Comparable profit stood at €414 million ($450.6 million) or €0.07 (8 cents) per share compared with €585 million or €0.10 per share in the year-ago quarter. The decline is primarily attributable to lower revenues and higher income tax expenses. The bottom line missed the Zacks Consensus Estimate of 9 cents.
Nokia Corporation Price, Consensus and EPS Surprise
Nokia Corporation price-consensus-eps-surprise-chart | Nokia Corporation Quote
Revenues
Total revenues in the second quarter of 2023 were €5,710 million ($6,215.3 million), down 3% from €5,873 million in the year-ago quarter. Demand softness in Network Infrastructure, Cloud and Network Services vertical hindered the top line during the quarter. Revenues fell short of the Zacks Consensus Estimate of $6,269 million.
Segment Results
Net sales from Network Infrastructure totaled €1,978 million ($2,153 million), down 8% on a reported basis and 6% on a constant-currency (cc) basis. At cc, the IP Networks registered an 11% decline while Optical Networks surged 16%. Fixed Networks also witnessed a decline of 14% year over year due to demand softness in North America. At cc, revenues from Submarine Networks were down 5% year over year. The top line fell short of our revenue estimate of €2,144 million.
Mobile Networks registered revenues of €2,623 million ($2,855.1 million), up 1% year over year on a reported basis and 5% at cc. Net sales surpassed our revenue estimate of €2,531.9 million. Market share gain in Europe and rapid 5G deployment in India boosted the top line in this segment. However, inventory adjustments and a cautious spending environment in North America partially reversed this benefit. Regional mix affected the operating margin as it fell to 7.9% from 11.2% in the prior-year quarter.
Cloud and Network Services contributed €742 million ($807.7 million), down 1% year over year on a reported basis but up 2% on a cc basis. At cc, the decline in Business Applications, Cloud and Cognitive Services dented the revenues in this vertical. Strength in Core Networks and Enterprise Solutions supported the top line.
Nokia Technologies accounted for €334 million ($363.6 million), registering growth of 10% on both a reported basis and cc basis. Net sales growth is mainly driven by several new licensing agreements signed during the second quarter.
Region-wise, net sales from India witnessed a substantial improvement of 333% year over year on a reported basis to €1,043 million. Accelerated 5G deployments and growth in Optical Networks are the key drivers behind this increase. Europe registered a revenue growth of 11% on a reported basis to €1,523 million, driven by healthy traction in Mobile Networks, strength in IP Networks and Fixed Networks.
North America saw a 42% decline on a reported basis to €1,293 million, owing to inventory adjustments and constrained spending behavior from customers. Net sales decreased 18% to €344 million in Greater China due to a decline in Mobile Networks and Network Infrastructure. Revenues from the Asia Pacific region fell 8% year over year to €527 million, owing to declining trends in Mobile Networks, Network Infrastructure, Cloud and Network Services.
Other Details
In the second quarter of 2023, the comparable gross margin declined to 38.8% from 40.6% in the prior-year quarter, primarily due to the negative impact of the regional mix in Mobile Networks. Growth in Nokia Technologies and a strong margin in Network Infrastructure partially offset this.
Cash Flow and Liquidity
Nokia utilized €333 million ($362.5 million) net cash for operating activities in the second quarter of 2023. As of Jun 30, 2023, the company had €5,106 million ($5,557.6 million) in cash and cash equivalents, with long-term interest-bearing liabilities of €3,584 million ($3,901.1 million). By Jun 30, 2023, the company repurchased around 40 million shares at an average price of approximately €4.14.
Outlook
For 2023, the company estimates revenues to be within the range of €23.2-€24.6 billion. The comparable operating margin is projected in the range of 11.5-13%. Free cash flow is expected to be within 20-50% of comparable operating profit. Capital expenditure is estimated to be €700 million. The comparable income tax rate is expected to be 25%.
Zacks Rank & Stocks to Consider
Nokia currently carries a Zacks Rank #4 (Sell).
InterDigital, Inc. (IDCC - Free Report) , sporting a Zacks Rank #1 (Strong Buy), delivered an earnings surprise of 170.89%, on average, in the trailing four quarters. In the last reported quarter, it pulled off an earnings surprise of 579.03%. You can see the complete list of today’s Zacks #1 Rank stocks here.
It is a pioneer in advanced mobile technologies that enable wireless communications and capabilities. The company designs and develops a wide range of advanced technology solutions, which are used in digital cellular and wireless 3G, 4G and IEEE 802-related products and networks.
Akamai Technologies, Inc. (AKAM - Free Report) , carrying a Zacks Rank #2 (Buy) at present, delivered an earnings surprise of 4.86%, on average, in the trailing four quarters. In the last reported quarter, it pulled off an earnings surprise of 6.06%.
It is a global provider of content delivery networks and cloud infrastructure services. The company’s solutions accelerate and improve the delivery of content over the Internet, enabling faster response to requests for web pages, streaming of video & audio, business applications, etc. Its offerings are intended to reduce the impact of traffic congestion, bandwidth constraints and capacity limitations on customers.
Viasat, Inc. (VSAT - Free Report) , currently sporting a Zacks Rank #1, delivered an earnings surprise of 7.98%, in the last reported quarter. Viasat designs, develops and markets advanced digital satellite telecommunications and other wireless networking and signal processing equipment. The company serves its high-bandwidth, high-performance communications solutions to the public, as well as military, enterprises and government enterprises.
Viasat provides broadband services named ‘Exede’ in North America. This features the world's highest capacity satellite, ViaSat-1; satellite broadband networking systems, global mobile satellite services comprising high-speed in-flight Internet, as well as global tracking and messaging; and Wi-Fi and other hotspot support, operations and management systems.
Note: €1 = $1.08849 (period average from Apr 1, 2023, to Jun 30, 2023)
€1 = $1.08844 (as of Jun 30, 2023)