On Feb 7, 2014, we upgraded our recommendation on Nokia Corporation (NOK) to Outperform from Neutral.
Why the Upgrade?
Divestiture of its unprofitable Device segment coupled with growing popularity of its HERE mapping business will not only drive margins but will also boost revenues. Moreover, continuous contract wins, aggressive deployment of 4GLTE network across China coupled with higher capital expenses related to network restructuring in emerging nations may bolster top-line growth for Nokia.
Nokia Solutions and Networks (:NSN) won a major contract in Russia. VimpelCom, the third largest telecom operator in Russia, selected NSN to provide equipment and services for its 4G LTE (Long-Term Evolution) network deployment plan. In Dec 2013, NSN renewed its contract with the largest Taiwanese telecom operator, Chunghwa Telecom, and has also extended its deal with Saudi Arabian carrier, STC.
Nokia also teamed up with Continental, an international automotive supplier, to offer connected car service to vehicle manufacturers.
Moreover, the company believes that its newly reported segment, Advanced Technologies, will generate more than $800 million in fiscal 2014 with the sale of its handset division to Microsoft. Microsoft will act as intellectual property licensee, thereby driving Nokia’s patent business going forward.
Nokia currently carries a Zacks Rank #2 (Buy).
Stocks That Warrant a Look
Other stocks that are worth considering within this sector are ShoreTel, Inc. (SHOR), Harris Corporation (HRS), and Comtech Telecommunications Corp. (CMTL). ShoreTel currently sports a Zacks Rank #1 (Strong Buy), while both Harris and Comtech carry a Zacks Rank #2.