U.S. markets open in 3 hours 47 minutes
  • S&P Futures

    4,222.50
    +12.50 (+0.30%)
     
  • Dow Futures

    33,379.00
    +119.00 (+0.36%)
     
  • Nasdaq Futures

    13,428.00
    +36.00 (+0.27%)
     
  • Russell 2000 Futures

    1,977.00
    +7.50 (+0.38%)
     
  • Crude Oil

    92.74
    +0.81 (+0.88%)
     
  • Gold

    1,805.30
    -8.40 (-0.46%)
     
  • Silver

    20.47
    -0.27 (-1.31%)
     
  • EUR/USD

    1.0330
    +0.0028 (+0.27%)
     
  • 10-Yr Bond

    2.7860
    0.0000 (0.00%)
     
  • Vix

    19.99
    -1.78 (-8.18%)
     
  • GBP/USD

    1.2213
    -0.0005 (-0.04%)
     
  • USD/JPY

    132.6880
    -0.1850 (-0.14%)
     
  • BTC-USD

    24,522.46
    +1,469.79 (+6.38%)
     
  • CMC Crypto 200

    577.32
    +46.10 (+8.68%)
     
  • FTSE 100

    7,489.79
    -17.32 (-0.23%)
     
  • Nikkei 225

    27,819.33
    -180.63 (-0.65%)
     

Ericsson Q2 Preview: Is a Rebound Quarter in Store?

  • Oops!
    Something went wrong.
    Please try again later.
·3 min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.

The first quarter of 2022 was one for the books, but not in the way that investors hoped. Valuation slashes were widespread as companies revealed they had battled margin compression and supply chain disruptions.

It goes without saying that we’ve found ourselves in a highly unique economic environment following a once-in-a-lifetime pandemic. Now, the second round of quarterly reports is quickly approaching.

There’s already a surplus of companies on deck this week to report quarterly results. One such company is Ericsson ERIC, a leading provider of communication networks, telecom services, and support solutions.

ERIC is a Zacks Rank #4 (Sell) with an overall VGM Score of an A and resides within the Zacks – Wireless Equipment Industry.

Let’s examine a few aspects of the company to see how it shapes up heading into Thursday; Ericsson will report before the opening bell.

Share Performance & Valuation

Ericsson shares have struggled immensely year-to-date, declining more than 30% in value and extensively underperforming the S&P 500.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

The picture doesn’t change much once expanding the timeframe to encompass a year’s worth of price action – ERIC shares have lost nearly 45% in value, underperforming the general market in this timeframe as well.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Although the share performance is disheartening, ERIC sports an attractive 0.9X forward price-to-sales ratio, well below its five-year median value of 1.2X and nowhere near 2020 highs of 1.7X. Additionally, the value represents an enticing 72% discount relative to its Zacks Sector.

ERIC has a Value Style Score of an A.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Quarterly Performance & Share Reactions

The company has posted mixed bottom-line results over its last four quarters, with two EPS beats and two EPS misses. The average EPS surprise over this four-quarter timeframe is 3.6%, and in its latest quarter, ERIC missed bottom-line expectations by a concerning 33%.

Top-line results have been primarily weak, with Ericsson reporting quarterly sales under expectations in six of its last ten quarterly reports. However, the company did post a marginal 0.4% top-line beat in its latest quarter.

Shares react well to EPS beats and poorly to bottom-line misses; over its last five EPS beats, shares have moved upwards four times, and over its previous five bottom-line misses, shares have moved downwards three times.

Growth Estimates

ERIC is forecasted to generate $6.6 billion in revenue for the quarter, good enough for a marginal 1.2% uptick in quarterly revenue from the year-ago quarter.

Additionally, the $0.16 EPS estimate reflects a solid double-digit increase in earnings of 15% year-over-year. Over the last 60 days, analysts have left their quarterly estimates unchanged.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Bottom Line

Although the company sports solid valuation metrics, the poor share performance, inconsistent quarterly results, and its Zack Rank #4 (Sell) lead me to believe investors would be better off staying on the sidelines for this quarterly release.

Instead, investors seeking exposure to the industry should consider Qualcomm QCOM. QCOM is a Zacks Rank #2 (Buy), and the company is forecasted to register a 50% growth in the bottom-line year-over-year.

Additionally, QCOM’s annual revenue is forecasted to climb by 33% in FY22.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research


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
 
QUALCOMM Incorporated (QCOM) : Free Stock Analysis Report
 
Ericsson (ERIC) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research