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Nokia (NOK) Reiterates 2022 Guidance Despite Russia Exit

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Nokia Corporation NOK has reiterated its earlier guidance for 2022 despite its decision to exit Russia’s market owing to the unprovoked invasion by the Russian army in Ukraine. The company has taken this decision in view of the Western sanctions against Russia, keeping in mind the gravity of the situation and the difficulties in operating in the country.

Nokia disclosed that Russia had accounted for about 2% of net sales in 2021. The decision to exit the country is not likely to affect overall revenues and earnings owing to strong demand across other regions. For 2022, Nokia expects net sales between €22.6 billion and €23.8 billion. Comparable operating margin is estimated to be between 11% and 13.5%. Free cash flow is projected in the 25-55% range of conversion from comparable operating profit. However, the company expects to record €100 million in the first quarter of 2022 as a provision for loss for the exit, although it is not likely to impact comparable results.

Nokia is well-positioned for the ongoing technology cycle, given the strength of its end-to-end portfolio. The company is driving the transition of global enterprises into smart virtual networks by creating a single network for all services, converging mobile and fixed broadband, IP routing and optical networks with software and services to manage them. Leveraging state-of-the-art technology, Nokia is transforming the way people and things communicate and connect with each other. These include seamless transition to 5G technology, ultra-broadband access, IP and Software Defined Networking, cloud applications and IoT.

The company facilitates its customers to move away from an economy-of-scale network operating model to demand-driven operations by offering easy programmability and flexible automation to support dynamic operations, reduce complexity and improve efficiency. Nokia seeks to expand its business into targeted, high-growth and high-margin vertical markets to address growth opportunities beyond its traditional primary markets.

It remains focused on building a robust scalable software business and expanding it to structurally attractive enterprise adjacencies. Nokia has inked more than 214 commercial 5G contracts across the globe. The company’s end-to-end portfolio includes products and services for every part of a network, which are helping operators to enable key 5G capabilities, such as network slicing, distributed cloud and industrial IoT. Accelerated strategy execution, sharpened customer focus and reduced long-term costs are expected to position the company as a global leader in the delivery of end-to-end 5G solutions.

Shares of the company have gained 28% in the past year against the industry’s loss of 2.6%. We remain impressed with the inherent growth potential of this Zacks Rank #2 (Buy) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Sierra Wireless, Inc. SWIR, carrying a Zacks Rank #2, is another solid pick within the industry. It has a long-term earnings growth expectation of 12.5% and delivered an earnings surprise of 58%, on average, in the trailing four quarters.

Over the past year, Sierra Wireless has gained 11.5%. Earnings estimates for the current year for the stock have moved up 68.8% since April 2021. The company continues to launch innovative products for business-critical operations that require high security and optimum 5G performance.

Arista Networks, Inc. ANET, sporting a Zacks Rank #1, is another solid pick for investors in the broader industry classification. It has a long-term earnings growth expectation of 15.4% and delivered a modest earnings surprise of 7.7%, on average, in the trailing four quarters. Earnings estimates for the current year have moved up 30.4% since April 2021, while that for the next year is up 41.1%.

Arista benefits from strong momentum and diversification across its top verticals and product lines. The company has a software-driven, data-centric approach to help customers build their cloud architecture and enhance their cloud experience. Over the past year, Arista has gained 69.6%.

KVH Industries, Inc. KVHI, a Zacks Rank #2 stock, delivered an earnings surprise of 20%, on average, in the trailing four quarters.

Despite global supply chain disruptions, KVH Industries is driving growth and margin expansion through new product introduction and subscriber migration to High-Throughput Satellites. The company aims to make decisive inroads into the still-nascent autonomous transportation markets with a strong balance sheet and zero debt. If KVH Industries manages to effectively mitigate supply chain woes, there could be room for cash flow expansion.


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