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

Zacks Equity Research

Ericsson ERIC is scheduled to report fourth-quarter 2019 results on Jan 24, before the opening bell. In the last reported quarter, the company missed the Zacks Consensus Estimate for earnings by 27 cents.

The Swedish telecom gear maker is expected to have recorded slightly lower revenues on a year-over-year basis due to aggressive competition and currency woes. It operates in a price-sensitive market, which has significant presence of arch-rivals like Nokia and Huawei.

Let’s find out how things have shaped up prior to the announcement —

Factors at Play

In October 2019, Ericsson completed the acquisition of Kathrein’s antenna and filter division to expand its Radio System portfolio with new products and capabilities. With this, the company gained a competent organization focusing on R&D, production and sales, and based in more than 20 locations including Germany, Romania, the United States, Mexico and China.

During the quarter under review, new 5G deals and rollouts were announced with Telia Norway selecting Ericsson as its sole 5G RAN provider. South Korea’s LG U+ chose Ericsson for 5G RAN and 5G Core and UK communication service provider O2 launched its commercial 5G network, including Ericsson’s 5G Cloud Core and 5G RAN products and solutions.

Innovation and partnering were in focus as the company highlighted its 5G collaboration with Chinese technology partner OPPO, through the establishment of a joint lab in Shenzhen, China. Ericsson’s global 5G footprint continued to grow. In Bahrain, communication service provider Zain selected Ericsson to build its 5G network, with the first commercial 5G services.

In South Africa, MTN picked Ericsson as its 5G network modernization vendor, where it supplies 5G products and solutions from its RAN, transport and Core portfolios. In Australia, Optus switched on 5G with Ericsson, strengthening its position as the leading supplier of 5G. Investigations by the U.S. Department of Justice and the Securities and Exchange Commission concluded in December. Ericsson fully cooperated with them, regarding historical compliance with the U.S. Foreign Corrupt Practices Act.

Also, Ericsson connected continents with a data call between Bern, Switzerland and Gold Coast, Australia using its Spectrum Sharing over live commercial 5G networks and commercial form factor 5G smartphones. Furthermore, in Australia, a notable advance in network orchestration and automation was made as the company partnered with Telstra to successfully deploy the industry’s first live cloud-native container-based Evolved Packet Core for 4G and 5G services. Ericsson teamed up with Microsoft to accelerate the delivery of new connected car services worldwide, with the integration of its Connected Vehicle Cloud and Microsoft’s Connected Vehicle Platform.

At the end of 2019, Ericsson had 78 commercial 5G agreements with communication service providers, 31 announced 5G contracts and was live with 24 5G networks globally. The Zacks Consensus Estimate for total revenues is pegged at $6,954 million. The company recorded revenues of $7,053 million in the year-ago quarter. Adjusted earnings per share are pegged at 16 cents, indicating an improvement from a loss of 9 cents reported a year ago.

What Our Model Says

Our proven model doesn’t conclusively predict an earnings beat for Ericsson this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

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 16 cents.

Ericsson Price and EPS Surprise

Ericsson Price and EPS Surprise

Ericsson price-eps-surprise | Ericsson Quote

Zacks Rank: Ericsson currently has a Zacks Rank #3.

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:

MKS Instruments, Inc. MKSI is slated to release quarterly results on Jan 28. It has an Earnings ESP of +8.41% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

W. R. Berkley Corporation WRB is scheduled to release results on Jan 28. The company has an Earnings ESP of +2.03% and carries a Zacks Rank #2.

Murphy Oil Corporation MUR has an Earnings ESP of +7.76% and sports a Zacks Rank of 1. The company is set to report results on Jan 30.

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