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Can Nokia (NOK) Spring a Surprise this Earnings Season?

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Nokia Corporation (NOK - Free Report) is scheduled to report second-quarter 2017 financial numbers on Jul 27, before the market opens.

Last quarter, the company delivered a negative earnings surprise of 25%. The company missed the Zacks Consensus Estimate for earnings and revenues. Earnings were flat on a year-over-year basis, while revenues declined year over year.

Let’s see how things shape up for this announcement.

Factors Likely at Play

The company’s below-par performance of the primary division – Networks unit — is concerning. This struggling Nokia Networks unit may hurt results in the second quarter.

Similar to the first quarter, the company’s net sales in Networks division is expected to decrease in the second quarter as well due to a weakening wireless infrastructure market, among other headwinds. The company’s global operations make its top line vulnerable to adverse foreign currency movements. This might further hurt the overall results this quarter.

However, we are positive on the company’s resolution of its patent-related dispute with Apple (AAPL - Free Report) in May 2017. Following this patch up, Nokia will get an up-front payment in cash from Apple.

Nokia’s growth-by-acquisition strategy is impressive too. At June-end, the company completed its acquisition of Comptel Corporation, a Finnish telecommunications software company. This buyout boosts Nokia’s software portfolio by adding capabilities that should help digital service providers deliver new communications services to the market faster. 

Earnings Whispers

Our proven model does not conclusively show that Nokia is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as elaborated below.

Zacks ESP: Nokia has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 4 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Nokia has a Zacks Rank #3, which increases the predictive power of ESP. However, the company's 0.00% ESP makes surprise prediction difficult.

Note that we caution against all Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Nokia Corporation Price and EPS Surprise


Nokia Corporation Price and EPS Surprise | Nokia Corporation Quote

Stocks to Consider

Investors interested in the broader computer and technology sector may consider the following stocks, since our model shows that these companies possess the right combination of elements to come up with an earnings beat this time.

AMTEK, Inc. (AME - Free Report) has an Earnings ESP of +1.61% and a Zacks Rank #3. The company will report its second-quarter earnings numbers on Aug 2.

Arrow Electronics, Inc. (ARW - Free Report) has an Earnings ESP of +0.57% and a Zacks Rank #2. The company will report its second-quarter earnings numbers on Aug 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

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