A few days back, Nokia Corporation NOK communicated that it has expanded its long-standing partnership with SETAR — a leading communications provider in Aruba. Marking its first end-to-end 5G deal in Latin America, the Finnish telecom network equipment maker aims to upgrade the operator’s RAN and modernize core elements and data management systems. Financial terms of the deal remained undisclosed. Nokia’s share price rose 0.54% in Tuesday’s trading session to close at $3.71.
Nokia currently has more than 50 5G commercial contracts worldwide. This deal demonstrates customer confidence in Nokia’s abilities in radio. The upgrade will provide SETAR with new business services in areas like hospitality and healthcare. Going forward, the company is likely to benefit from accelerated time-to-market and improved total cost of ownership.
Markedly, Nokia already works with SETAR to run a 4.5G island-wide network using Single RAN Advanced AirScale technology. The entire island country is expected to be connected by 5G network within two years. The move, in turn, will help create new services for the island’s 110,000 inhabitants and 2 million annual tourists.
The project includes site simplification by deploying Nokia’s AirScale dual and triple band Remote Radio Heads, reducing more than 60% space requirements. The upgrade to 5G will be done using Nokia’s massive MIMO technology with 64 antennas to enable new mobile broadband uses cases like FWA, AR/VR and smart cities. It involves enhancing SETAR’s network architecture with Centralized RAN and AirScale Cloud Controllers to support more capacity while managing network resources more efficiently.
In the last reported quarter, Nokia’s net sales increased 4.2% year over year to €5,686 million. The performance was driven by improved industry demand and competitiveness of its end-to-end portfolio, coupled with growth across four out of six regions and all customer types. While sales increased in Asia-Pacific, Europe, Latin America and North America (up 14%, 6%, 6% and 7%, respectively), it declined in Greater China and Middle East & Africa (down 21% and 7%, respectively).
Due to margin pressure and additional 5G investments, Nokia lowered its 2019 and 2020 guidance. For 2019, the company expects non-IFRS earnings per share of €0.21 (+/- 3 cents), which was previously projected between €0.25 and €0.29. Non-IFRS operating margin is anticipated to be 8.5% (+/- 1 percentage point), clipped from earlier forecast of 9-12%.
For 2020, non-IFRS earnings per share are expected to be €0.25 (+/- 5 cents) compared with the previously anticipated €0.37-€0.42. Non-IFRS operating margin is likely to be 9.5% (+/- 1.5 percentage point), trimmed from previous estimate of 12-16%.
Shares of Nokia have lost 33.4% against the industry’s growth of 27.8% in the past year. The company topped earnings estimates twice in the trailing four quarters, delivering a positive surprise of 81.6%, on average.
However, Nokia is witnessing healthy underlying momentum in its focus areas of software and enterprise, which augurs well for its licensing business. It has launched more than 15 live 5G networks with customers, including Sprint, Verizon Communications, AT&T and T-Mobile in the United States; Vodafone Italy and Zain in Saudi Arabia; and SKT, KT and LGU+ in Korea.
Nokia currently has a Zacks Rank #3 (Hold).
Some better-ranked stocks in the industry are Qualcomm Incorporated QCOM, Ubiquiti Inc. UI and PCTEL, Inc. PCTI, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Qualcomm has a long-term earnings growth expectation of 14%.
Ubiquiti has a long-term earnings growth expectation of 9.4%.
PCTEL surpassed earnings estimates in each of the trailing four quarters, the surprise being 150.6%, on average.
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