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Will Top-Line Contraction Hurt Ericsson's (ERIC) Q2 Earnings?
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Ericsson (ERIC - Free Report) is scheduled to report second-quarter 2023 results on Jul 14, before the opening bell. In the last reported quarter, the company surpassed the Zacks Consensus Estimate by 4 cents. It pulled off a trailing four-quarter earnings surprise of 21.11%, on average.
Despite a strong emphasis on innovation and several project wins driven by rapid 5G adoption, the Sweden-based telecom equipment provider is expected to have recorded lower revenues year over year. Macroeconomic headwinds, intense competition in the communication industry and rising operating expenses are likely to weigh on profits.
Factors at Play
During the quarter, the company achieved a landmark of developing 1 million 5G radios with its manufacturing partner Flex in Poland. The one-millionth unit is set to be installed at leading Sweden-based communications service provider — Telia Company — as Ericsson aims to transform the Nordics and the Baltics region with superfast 5G connectivity.
The company teamed up with Proptivity to launch the world's first neutral host-led shared indoor 5G radio access network (RAN), powered by Radio Dot System. It will support visitors and employees and mitigate connectivity challenges in busy public places like shopping malls. These developments are likely to have positively impacted its second-quarter revenues.
In the quarter under review, Ericsson joined forces with Intel and Hewlett Packard to boost Cloud RAN advancement and develop cutting-edge, resilient and sustainable solutions for future networks. The company also partnered with Mediatek to demonstrate a record 5G upload speed of 440 Mbps. Ericsson is benefiting from extensive 5G expansion worldwide. It collaborated with Intel to boost 5G infrastructure development in Thailand and ensure a higher proliferation of 5G across Malaysia.
In the quarter to be reported, Polska Grupa Energetyczna group has selected Ericsson’s RAN and core network solutions to upgrade mission-critical communication infrastructure in the power sector. Digital Nasional Berhad, a leading telecommunication company based in Malaysia deployed the Ericsson Security Manager solution to enhance cyber defense of the critical network ecosystem. These notable developments are likely to have a positive impact on the company’s top line.
However, lower capital expenditure from North American operators, owing to near-term uncertainty and inventory adjustments are headwinds. Ericsson faces fierce competition from other established players in the telecommunications industry. Keeping up with rapid technological advancements and maintaining a strong market position demands a substantial investment in research and development. This is likely to have strained margins and negatively affected its operations.
For the second quarter, the Zacks Consensus Estimate for total revenues is pegged at $6,125 million, which indicates a decline from $6,356 million reported in the year-ago quarter. Adjusted earnings per share are pegged at 5 cents, suggesting a decline from 14 cents recorded in the year-earlier quarter.
Earnings Whispers
Our proven model predicts a likely earnings beat for Ericsson this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. That’s exactly the case here.
Earnings ESP: Ericsson has an Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, of +47.37%. The Most Accurate Estimate is pegged at 7 cents while the Zacks Consensus Estimate is pegged at 5 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Ericsson currently carries a Zacks Rank #2.
Other Stocks to Consider
Here are some other companies that you may want to consider as our model shows that these too have the right combination of elements to post an earnings beat this quarter:
Meta Platforms (META - Free Report) has an Earnings ESP of +7.34% and carries a Zacks Rank of 2. The company is set to report quarterly numbers on Jul 26.
Tesla, Inc. (TSLA - Free Report) has an Earnings ESP of +2.41% and carries a Zacks Rank of 3. The company is scheduled to report quarterly numbers on Jul 19.
Image: Bigstock
Will Top-Line Contraction Hurt Ericsson's (ERIC) Q2 Earnings?
Ericsson (ERIC - Free Report) is scheduled to report second-quarter 2023 results on Jul 14, before the opening bell. In the last reported quarter, the company surpassed the Zacks Consensus Estimate by 4 cents. It pulled off a trailing four-quarter earnings surprise of 21.11%, on average.
Despite a strong emphasis on innovation and several project wins driven by rapid 5G adoption, the Sweden-based telecom equipment provider is expected to have recorded lower revenues year over year. Macroeconomic headwinds, intense competition in the communication industry and rising operating expenses are likely to weigh on profits.
Factors at Play
During the quarter, the company achieved a landmark of developing 1 million 5G radios with its manufacturing partner Flex in Poland. The one-millionth unit is set to be installed at leading Sweden-based communications service provider — Telia Company — as Ericsson aims to transform the Nordics and the Baltics region with superfast 5G connectivity.
The company teamed up with Proptivity to launch the world's first neutral host-led shared indoor 5G radio access network (RAN), powered by Radio Dot System. It will support visitors and employees and mitigate connectivity challenges in busy public places like shopping malls. These developments are likely to have positively impacted its second-quarter revenues.
In the quarter under review, Ericsson joined forces with Intel and Hewlett Packard to boost Cloud RAN advancement and develop cutting-edge, resilient and sustainable solutions for future networks. The company also partnered with Mediatek to demonstrate a record 5G upload speed of 440 Mbps. Ericsson is benefiting from extensive 5G expansion worldwide. It collaborated with Intel to boost 5G infrastructure development in Thailand and ensure a higher proliferation of 5G across Malaysia.
In the quarter to be reported, Polska Grupa Energetyczna group has selected Ericsson’s RAN and core network solutions to upgrade mission-critical communication infrastructure in the power sector. Digital Nasional Berhad, a leading telecommunication company based in Malaysia deployed the Ericsson Security Manager solution to enhance cyber defense of the critical network ecosystem. These notable developments are likely to have a positive impact on the company’s top line.
However, lower capital expenditure from North American operators, owing to near-term uncertainty and inventory adjustments are headwinds. Ericsson faces fierce competition from other established players in the telecommunications industry. Keeping up with rapid technological advancements and maintaining a strong market position demands a substantial investment in research and development. This is likely to have strained margins and negatively affected its operations.
For the second quarter, the Zacks Consensus Estimate for total revenues is pegged at $6,125 million, which indicates a decline from $6,356 million reported in the year-ago quarter. Adjusted earnings per share are pegged at 5 cents, suggesting a decline from 14 cents recorded in the year-earlier quarter.
Earnings Whispers
Our proven model predicts a likely earnings beat for Ericsson this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. That’s exactly the case here.
Earnings ESP: Ericsson has an Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, of +47.37%. The Most Accurate Estimate is pegged at 7 cents while the Zacks Consensus Estimate is pegged at 5 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Ericsson Price and EPS Surprise
Ericsson price-eps-surprise | Ericsson Quote
Zacks Rank: Ericsson currently carries a Zacks Rank #2.
Other Stocks to Consider
Here are some other companies that you may want to consider as our model shows that these too have the right combination of elements to post an earnings beat this quarter:
International Business Machines Corporation (IBM - Free Report) is set to release quarterly numbers on Jul 19. It has an Earnings ESP of +1.58% and carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Meta Platforms (META - Free Report) has an Earnings ESP of +7.34% and carries a Zacks Rank of 2. The company is set to report quarterly numbers on Jul 26.
Tesla, Inc. (TSLA - Free Report) has an Earnings ESP of +2.41% and carries a Zacks Rank of 3. The company is scheduled to report quarterly numbers on Jul 19.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.