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Nokia (NOK) to Report Q4 Earnings: What's in the Cards?

Zacks Equity Research

Nokia Corporation NOK is scheduled to report fourth-quarter 2018 financial results before the opening bell on Jan 31. In the last reported quarter, the company delivered a positive earnings surprise of 16.7%.

The Finnish telecom equipment manufacturer is likely to report lower revenues in the quarter, primarily due to strong seasonality and risks arising from short-term delays in project timing and deliveries despite ramp up of 5G deliveries, particularly in North America.

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

Factors at Play

During the fourth quarter, Nokia unveiled new Fixed Wireless Access products to aid communications service providers in expediting the deployment of ultra-broadband. Notably, the company’s improved portfolio comprises new FastMile high-gain outdoor receivers and indoor gateways, auguring well for its business growth.

Moreover, Nokia has reorganized its internal structure and strengthened its leadership team to capitalize on 5G opportunities. The creation of Access Networks Division by bringing the company’s Mobile Networks and Fixed Networks Business Groups into a single business unit has enabled it to simplify its management structure and leverage full portfolio.

During the quarter, Nokia inked a patent licensing agreement with OPPO Electronics Corporation — a Chinese consumer electronics and mobile communication firm Per the deal, OPPO would make fixed payments to Nokia over the license period, ensuring a steady revenue stream for the company.

Furthermore, Nokia and StarHub completed the first outdoor trial of 5G New Radio on 3.5GHz frequency band in Singapore to enhance consumer service and boost efficiencies for enterprises. Nokia deployed AirScale Radio Access technology with 5G New Radio 3GPP-compliant software and the Nokia AirFrame data center solution. The company is offering communications service providers a pre-integrated and ultra-optimized network using its 5G Future X end-to-end architecture to accelerate the launch of 5G.

Also, Nokia in collaboration with China Mobile Research Institute — the research division of China Mobile Limited — has introduced the industry's first hybrid indoor radio solution with location services. The 5G hybrid distributed indoor system helps operators to minimize deployment costs, and it testifies to the 5G commercial readiness of Nokia AirScale Indoor Radio portfolio. Being technology partner, Nokia remains committed to working closely with communications service providers while building on its technology momentum to help modernize operators’ network.

Despite such strategic collaborations and service enhancements, the Zacks Consensus Estimate for fourth-quarter total revenues stands at $7,613 million, primarily due to a soft overall market as well as heavy workload given the scale of the rollouts underway.

Notably, it reported revenues of $7,833 million in the year-earlier quarter. Adjusted earnings per share are pegged at 14 cents. The company reported earnings of 15 cents a year ago. However, Nokia anticipates Networks operating margin between 6% and 9% for full-year 2018 on the back of its ongoing solid strategy execution.

What Our Model Says

Our proven model does not conclusively show that Nokia is likely to beat earnings this quarter as it does not possess one of 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: Nokia’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 14 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Nokia Corporation Price and EPS Surprise

Nokia Corporation Price and EPS Surprise | Nokia Corporation Quote

Zacks Rank: Nokia currently has a Zacks Rank #3, 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:

Sprint Corporation S has an Earnings ESP of +13.33% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Columbus McKinnon Corp. CMCO has an Earnings ESP of +6.90% and a Zacks Rank #2. 

ABIOMED, Inc. ABMD has an Earnings ESP of +2.60% and a Zacks Rank #2.

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