U.S. markets open in 7 hours 24 minutes

Ericsson (ERIC) to Report Q4 Earnings: What's in the Cards?

Zacks Equity Research

Ericsson ERIC is scheduled to report fourth-quarter 2018 financial results before the opening bell on Jan 25. In the last reported quarter, the company delivered a positive earnings surprise of 200%.

The company is likely to report higher revenues in the to-be-reported quarter on the back of healthy growth dynamics. Whether this can result into an earnings beat remains to be seen.

Let’s find out how things are shaping up prior to the announcement.

Factors at Play

Ericsson conducted 4G LTE trial using 600 MHz of spectrum, together with Agri-Valley Services and NewCore Wireless, in the beginning of the fourth quarter. The trial, which took place in Caro, MI, represents the first-of-its-kind with a regional carrier in the United States. The 600 MHz low-band spectrum enables operators to extend coverage by utilizing low band radio wave propagation, resulting in more coverage per cell site in rural areas. This is considered to be a major step forward by Ericsson in offering 600 MHz 4G LTE coverage to its rural customers on existing network infrastructure.

During the fourth quarter, the Swedish firm entered into a strategic partnership with Fujitsu — a leading Japanese information and communication technology company — to deliver 5G network solutions and related services. They jointly aim to develop their combined portfolios, covering radio access and core network, for the 5G market in Japan and connect communications service providers to the global 5G ecosystem. Moreover, Ericsson inked a new deal with Telenor Group — a Norwegian multinational telecommunications company — to transform the latter’s core network in Sweden, Denmark and Norway, by deploying Ericsson Cloud Core solutions for 5G across multiple data centers.

During the quarter, Ericsson was chosen by Volvo Car Group under a five-year contract to provide the industrialized Ericsson Connected Vehicle Cloud platform to facilitate the latter’s digital vehicle services in more than 120 markets worldwide. Notably, the deal, which would enable Volvo Car Group to provide car owners with its latest developments in connected car digital services, is the largest to date for Ericsson Connected Vehicle Cloud.

Further, Ericsson was chosen by Swisscom — the largest telecommunications service provider in Switzerland — to augment the latter’s customer experience through deployment of the Ericsson Expert Analytics solution into its existing Big Data ecosystem. Ericsson also secured a multi-year contract from Millicom’s commercial brand — TIGO. Per the deal, Ericsson will work on modernizing TIGO’s radio access network across Honduras and Paraguay, involving the rollout of Ericsson Radio System.

The healthy demand for Ericsson services is likely to translate into higher revenues in the quarter. However, management expects flat business from North America while the rest of the world is likely to deliver normal seasonality. For the fourth quarter, the Zacks Consensus Estimate for total revenues stands at $6,884 million, up from $6,881 million reported in the year-earlier quarter. Adjusted earnings per share are pegged at 15 cents. The company incurred a loss of 14 cents a year ago.

What Our Model Says

Our proven model does not conclusively show that Ericsson is likely to beat earnings this quarter as it does not possess both the two key components. 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. This is not the case here as you will see below:

Earnings ESP: Ericsson’s Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is 0.00% as both are pegged at 15 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Ericsson Price and EPS Surprise

Ericsson Price and EPS Surprise | Ericsson Quote

Zacks Rank: Ericsson currently carries a Zacks Rank #2, which increases the predictive power of ESP. However, the company’s 0.00% Earnings ESP makes surprise prediction difficult.

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

Stocks to Consider

Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Meridian Bioscience, Inc. VIVO has an Earnings ESP of +1.89% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Intuitive Surgical, Inc. ISRG has an Earnings ESP of +2.63% and a Zacks Rank #2.  

Alaska Air Group, Inc. ALK has an Earnings ESP of +2.23% and a Zacks Rank #2.  

Looking for Stocks with Skyrocketing Upside?

Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.

Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.

See the pot trades we're targeting>>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Alaska Air Group, Inc. (ALK) : Free Stock Analysis Report
 
Ericsson (ERIC) : Free Stock Analysis Report
 
Meridian Bioscience Inc. (VIVO) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.