Yahoo Finance Nokia (NOK) Q1 Earnings Beat Estimates Despite Lower Revenues
Nokia Corporation NOK reported mixed first-quarter 2024 results, with the bottom line surpassing the Zacks Consensus Estimate but the top line missing the same. The company reported a top-line contraction year over year owing to sluggish demand trends in multiple verticals. A slowdown in 5G deployments in India, weak demand in North America and macroeconomic headwinds affected the net sales. The patent license agreements in the Nokia Technologies vertical partially cushioned the top line.
Net Income
Nokia registered a net income of €438 million ($475.51 million) or €0.08 (9 cents) per share in the first quarter compared to an income of €289 million or €0.05 per share in the year-ago quarter.
Comparable profit was €501 million ($543.91 million) or €0.09 (10 cents) per share, up from €342 million or €0.06 per share in the year-earlier quarter. The improvement is primarily attributed to higher operating profit and net positive fluctuations in financial income and expenses. The bottom line beat the Zacks Consensus Estimate of 6 cents.
Nokia Corporation Price, Consensus and EPS Surprise
Nokia Corporation price-consensus-eps-surprise-chart | Nokia Corporation Quote
Revenues
Quarterly net sales stood at €4.67 billion ($5.07 billion), down 20% from €5.85 billion in the year-ago quarter. Demand softness in multiple segments hindered the top line. Revenues fell short of the Zacks Consensus Estimate of $5.19 billion.
Segment Results
Net sales from Network Infrastructure totaled €1.66 billion ($1.80 billion), down from €2.24 billion in the year-ago quarter. The top line missed our revenue estimate of €1.88 billion. At cc, IP Networks recorded a 23% decline year over year owing to customer’s cautious approach in the Americas and Asia-Pacific (APAC) region. Sales from Submarine Networks declined 23% at cc. The disruption caused by the ongoing conflict in the Red Sea region has affected net sales.
Revenues from Optical Networks decreased 34% year over year on a cc basis. Fixed Networks witnessed a 22% decline year over year at cc, primarily due to low demand in North America.
Mobile Networks generated revenues of €1.58 billion ($1.71 billion), down 39% year over year on a reported basis and 37% at cc. Net sales missed our estimate of €1.87 billion. A slowdown in the 5G deployments in India and weakness in North America hindered the top line in this vertical. Ongoing Macroeconomic challenges also affected 5G deployments in Europe. However, positive trends in the Middle East and Africa were a tailwind.
Net sales from Cloud and Network Services were €652 million ($708 million), down 14% year over year on a reported basis and 13% on a cc basis. Declining trends in each of its businesses and soft demand in North America and EMEA (Europe, Middle East & Africa) region impeded the net sales in this vertical. The top line in this segment missed our revenue estimate of €719.3 million.
Nokia Technologies contributed €757 million ($822 million) compared with €242 million in the year-ago quarter. Net sales increased 213% on a reported basis and 216% at cc. The uptick was mainly driven by patent license agreements with OPPO, Vivo and other.
Region-wise, net sales from the EMEA region rose to €2.29 billion from €1.9 billion in the year-earlier quarter. The 21% uptick at cc primarily reflects catch-up net sales in Nokia Technologies. Revenues from the Middle East and Africa grew 8% at cc. However, excluding Nokia Technologies, revenues from Europe actually declined year over year.
Revenues in the APAC region declined to €947 million, down 44% at cc year over year. Normalization of 5G deployments in India and declining trends in Greater China impacted the net sales. Americas witnessed a 36% decline at cc to €1.20 billion due to soft demand trends in the Mobile Networks and Network Infrastructure segments.
Other Details
In the March quarter, the comparable gross margin increased to 48.6% from 37.7% in the year-ago quarter. Strong contribution from Nokia Technologies and favorable regional and product mix in the Mobile Networks boosted the gross margin. The comparable operating profit rose 25% to €597 million ($648.13 million), with a margin of 12.8%. Benefits of catch-up net sales in Nokia Technologies and declining operating expenses elevated the operating profit.
Cash Flow and Liquidity
Nokia utilized €1.07 billion ($1.16 billion) net cash for operating activities in the first quarter of 2024. As of Mar 31, 2024, the company had €6.56 billion ($7.08 billion) in cash and cash equivalents, with long-term interest-bearing liabilities of €3.12 billion ($3.39 billion)
Outlook
For 2024, Nokia expects a comparable operating margin in the range of €2.3-€2.9 billion. Free cash flow is estimated within 30-60% of comparable operating profit. Capital expenditure is estimated to be €600 million.
Management expects the Network Infrastructure segment will regain growth momentum in the remainder of current fiscal. Fixed networks are expected to benefit from upcoming government projects in the second half of 2024.
Zacks Rank & Stocks to Consider
Nokia currently carries a Zacks Rank #4 (Sell).
Pinterest PINS, sporting a Zacks Rank #1 (Strong Buy) at present, delivered a trailing four-quarter average earnings surprise of 37.42%. In the last reported quarter, it delivered an earnings surprise of 3.92%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Pinterest is increasingly establishing a unique value proposition to advertisers that could provide a competitive advantage in the long haul. Through various innovations, it continues to dramatically improve the advertising platform, which appears to be one of the best ad platforms for consumer discretionary brands looking for ways to reach customers and stretch smaller ad budgets.
NVIDIA Corporation NVDA, currently sporting a Zacks Rank #1, delivered a trailing four-quarter average earnings surprise of 20.18%. In the last reported quarter, it delivered an earnings surprise of 13.41%.
NVIDIA is the worldwide leader in visual computing technologies and the inventor of the graphic processing unit. Over the years, the company’s focus evolved from PC graphics to AI-based solutions that support high-performance computing, gaming and virtual reality platforms.
Arista Networks, Inc. ANET, sporting a Zacks Rank #1 at present, is likely to benefit 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. Arista has a long-term earnings growth expectation of 17.5% and delivered an earnings surprise of 13.3%, on average, in the trailing four quarters.
It holds a leadership position in 100-gigabit Ethernet switching share in port for the high-speed datacenter segment. Arista is increasingly gaining market traction in 200 and 400-gig high-performance switching products and remains well-positioned for healthy growth in data-driven cloud networking business with proactive platforms and predictive operations.
Note: €1 = $1.08565 (period average from Jan 1, 2024, to Mar 31, 2024)
€1 = $1.07914 (as of Mar 31, 2024)
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