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Nokia (NOK) Surpasses Earnings & Revenue Estimates in Q1

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·4 min read
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Nokia NOK reported impressive first-quarter 2022 results, wherein both the bottom and the top lines beat the Zacks Consensus Estimate.

Net Income

Reported profit (from continuing operations) in the quarter was €177 million or €0.03 per share compared with €272 million or €0.05 per share in the prior-year quarter.

Comparable profit came in at €416 million ($466.7 million) or €0.07 (8 cents) per share, up from €375 million or €0.07 per share in the year-ago quarter. The improvement reflects an increase in comparable operating profit as well as lower financial expenses and income tax expenses. The bottom line beat the Zacks Consensus Estimate by a penny.

Nokia Corporation Price, Consensus and EPS Surprise

Nokia Corporation Price, Consensus and EPS Surprise
Nokia Corporation Price, Consensus and EPS Surprise

Nokia Corporation price-consensus-eps-surprise-chart | Nokia Corporation Quote

Revenues

On a constant currency basis, quarterly net sales improved 5.4% year over year to €5,348 million ($6,001 million), driven by growth in Network Infrastructure and Cloud and Network Services. Reported net sales grew 5.4%, benefiting from foreign exchange rate fluctuations. The top line beat the consensus estimate of $5,921 million.

Segment Results

On a constant currency basis, net sales in Mobile Networks declined 4% year over year to €2,268 million due to supply chain constraints despite strong end-market demand. The segment’s gross margin grew 660 basis points (bps) to 39.8%. Operating margin was at 7.5%, up from 3.4%.

Network Infrastructure sales were up 9% year over year to €1,974 million, as the business continued to benefit from strong demand in Fixed Networks and Submarine Networks. Gross margin decreased 20 bps to 34.7%. Operating margin was down 90 bps to 9.9%.

Cloud and Network Services sales were up 5% year over year to €736 million, driven by growth in Core Networks, as operators continue to transition to 5G core, as well as growth in Cloud and Cognitive Services. Gross margin soared 520 bps to 38.6%. Operating margin improved 570 bps to 2.7%.

Nokia Technologies sales declined 16% year over year to €306 million due to two licensing agreements that ended in 2021, which are in the process of renewal, along with the expiration of a patent licensing agreement with a company that has exited the smartphone market. Gross margin was flat at 99.7%. Operating margin declined 650 bps to 71.9%.

Sales in Group Common and Other grew 26% year over year to €76 million, as Radio Frequency Systems witnessed strong growth in North America. Gross margin was 2.6%, up 610 bps.

Other Details

Cost of sales increased to €3,179 million from €3,151 million in the prior-year quarter. Gross profit grew 12.7% to €2,169 million. Operating profit was €354 million compared with €431 million a year ago.

Cash Flow & Liquidity

During the first quarter, Nokia generated €559 million of cash from operating activities compared with €1,304 million in the year-ago quarter.

As of Mar 31, 2022, the company had €6,341 million ($7,047.4 million) in cash and cash equivalents with €4,489 million ($4,989.1 million) of long-term liabilities.

Outlook

For 2022, Nokia expects net sales between €22.9 billion and €24.1 billion. Comparable operating margin is estimated between 11% and 13.5%. Free cash flow is projected in the 25-55% range of conversion from comparable operating profit.

Zacks Rank & Other Stocks to Consider

Nokia currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Gogo Inc. GOGO is another top-ranked stock in the broader Zacks Computer and Technology sector, sporting a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has been revised upward by 25% over the past 60 days.

Gogo delivered a trailing four-quarter earnings surprise of 65%, on average. It has rallied 79.8% in the past year.

Viasat, Inc. VSAT, carrying a Zacks Rank #2, is a decent pick for investors. The consensus estimate for current-year earnings has remained stable over the past 60 days.

Viasat pulled off a trailing four-quarter earnings surprise of 129.9%, on average. It has lost 30.1% in the past year.

Sierra Wireless, Inc. SWIR carries a Zacks Rank #2. The consensus mark for current-year earnings has been revised upward by 237.5% over the past 60 days.

Sierra Wireless pulled off a trailing four-quarter earnings surprise of 58%, on average. The stock has inched up 3.3% in the past year.

Conversion rate used:

€1 = $1.121927 (period average from Jan 1, 2022 to Mar 31, 2022)

€1 = $1.111399 (as of Mar 31, 2022)


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