Nokia Corporation (NYSE:NOK - News), the largest mobile phone manufacturer in the world, declared fourth quarter 2011 financial results, beating both the top and bottom-line expectations.
Fourth Quarter Highlights
Quarterly net revenue was approximately $13,496.7 million, down 21% year over year but was above the Zacks Consensus Estimate of $13,407 million. Quarterly net loss was approximately $1286.9 million or a loss of 39 cents per share compared with net income of $1,192.5 million or 27 cents per share in the prior-year quarter.
However, adjusted (excluding special items) EPS of 8 cents in the reported quarter beat the Zacks Consensus Estimate by a couple of cents.
Quarterly adjusted operating income was approximately $644.8 million, down 56% year over year. Adjusted operating margin in the fourth quarter was 4.8% compared with 8.6% in the year-ago quarter. In the fourth quarter of 2011, Nokia shipped 19.6 million smart devices and 93.9 million Mobile Phones, down 31% and 1% year over year, respectively.
Agreements of Analysts
Of the 19 analysts covering the stock in the last 7 days, none moved the EPS estimate upward for the first and second quarter of fiscal 2012 but three revised the estimate downward for the same periods.
Likewise, for fiscal 2012, out of the 24 analysts covering the stock in the last 7 days, none increased the EPS estimates, though seven analysts decreased them. Similarly, for fiscal 2013, in the last 7 days, out of the 16 analysts covering the stock, none moved the EPS estimate upward, however, two analysts moved in the opposite direction.
Such bearish stance adopted by the analysts suggests that they are apprehensive about the success of the newly launched Windows-based Lumia smartphones.
Currently, the Zacks Consensus EPS Estimate for the first quarter of fiscal 2012 stands at break-even, which indicates a loss of 100.93% year over year. Similarly, for the second quarter of fiscal 2012, the Zacks Consensus EPS Estimate of 3 cents reflects a loss of 63.16%.
Likewise, for fiscal 2012, Zacks Consensus EPS Estimate is pegged at 24 indicating a loss of 37.83%. However, for fiscal 2012, Zacks Consensus EPS Estimate stands at 43 cents, reflecting a profit of 83.07%.
Magnitude of Estimate Revisions
In synergy with the downward revision of estimate, in the last 7 days, the current Zacks Consensus Estimate for first and second quarter 2012 was just a penny below the previous estimate of 1 cent and 4 cents per share, respectively.
Likewise, for fiscal 2011 and 2012, the current Zacks Consensus Estimates were 5 cents and 2 cents below the earlier estimate of 29 cents and 45 cents, respectively.
Earning Surprises
With respect to earnings surprises, the company’s consistent track record in the last four quarters is expected to persist in the coming quarters. In the last quarter, Nokia produced an earnings surprise of 2 cents or 33.33%.
The ongoing quarter and the second quarter of fiscal 2012 contains an upside potential of 0.00% (essentially a proxy for future earnings surprises). However, fiscal 2012 and 2013 reflects a downside risk of 8.33% and 4.65% respectively.
Our Recommendation
Continuous loss of market share coupled with stiff competition from Android-based smartphones and Apple Inc’s (NasdaqGS:AAPL - News) iPhones are headwinds for the company.
However, increased shipments of Nokia’s dual-sim handsets in the emerging nations and aggressive cost reduction process implemented by the company will act as catalysts for growth going forward.
We thus maintain our long-term Neutral recommendation for Nokia. Currently, Nokia has a Zacks#3 Rank, implying a short-term Hold rating on the stock.
About Earnings Estimate Scorecard
Len Zacks, PhD in mathematics from MIT, proved over 30 years ago that earnings estimate revisions are the most powerful force impacting stock prices. He turned this ground breaking discovery into two of the most celebrating stock rating systems in use today. The Zacks Rank for stock trading in a 1 to 3 month time horizon and the Zacks Recommendation for long-term investing (6+ months). These “Earnings Estimate Scorecard” articles help analyze the important aspects of estimate revisions for each stock after their quarterly earnings announcements. Learn more about earnings estimates and our proven stock ratings at: http://www.zacks.com/education/
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