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Nokia (NOK) Misses Q4 Earnings Estimates on Lower Revenues
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Nokia Corporation (NOK - Free Report) reported soft fourth-quarter 2023 results, with the top and bottom lines missing the respective Zacks Consensus Estimate. Sluggish demand trends induced by the challenging macro environment, high interest rates and inventory adjustments led to a top-line contraction year over year. Normalization of 5G deployments in India and constrained spending in North America also affected revenues.
Net Income
Nokia registered a net loss of €33 million ($35.51 million) or a loss of €0.01 (a penny) per share in the fourth quarter against an income of €3,152 million or €0.56 per share in the year-ago quarter.
Comparable profit was €568 million ($611.2 million) or €0.10 (11 cents) per share, down from €929 million or €0.16 per share in the year-earlier quarter. The downturn was primarily induced by a sharp decline in net sales year over year. The bottom line missed the Zacks Consensus Estimate of 14 cents.
In 2023, Nokia reported a net income of €679 million or €0.12 per share compared to €4,259 million or €0.75 per share in the previous year. The full-year comparable profit stood at €1,623 million or €0.29 per share compared to €2,481 million or €0.44 per share in 2022.
Nokia Corporation Price, Consensus and EPS Surprise
Quarterly net sales stood at €5,707 million ($6,141.82 million), down 23% from €7,449 million in the year-ago quarter. Sluggish demand trends across all verticals impeded revenue growth. Revenues fell short of the Zacks Consensus Estimate of $6,662 million.
In 2023, the company reported €22,258 million in revenues, down from €24,911 million in 2022.
Segment Results
Net sales from Network Infrastructure totaled €2,003 million ($2,155.61 million), down 26% on a reported basis and 24% on a constant-currency (cc) basis. The top line missed our revenue estimate of €2,192.1 million. Revenues from Optical Networks decreased 23% year over year on a cc basis. Weakness in several regions, including Asia Pacific and Europe, affected net sales.
At cc, IP Networks recorded a 25% decline year over year due to cautious spending behavior from communication service providers in North America. Fixed Networks witnessed a 29% decline year over year at cc due to lower fiber investments in Europe and North America. Sales from Submarine Networks were down 10% at cc year over year.
Mobile Networks generated revenues of €2,450 million ($2,636.67 million), down 17% year over year on a reported basis and 14% at cc. Net sales missed our revenue estimate of €2,719.7 million. The segment reported a net sales decline in North America, India and Europe. A slowdown in 5G deployments in Europe and inventory depletion in North America affected the top line in this segment.
Net sales from Cloud and Network Services were €977 million ($1051.44 million), down 8% year over year on a reported basis and 5% on a cc basis. The segment witnessed declining trends in each of its businesses except Business Applications. The top line in this segment beat our revenue estimate of €941 million.
Nokia Technologies contributed €251 million ($270.12 million) compared with €679 million in the year-ago quarter. Net sales declined 63% on a reported basis and 63% at cc. The downturn was mainly induced by a lower net sale from a license that expired in the third quarter of 2023.
Region-wise, net sales from the Middle East & Africa witnessed 9% growth on a reported basis to €646 million. Growth in the Mobile Networks and Network Infrastructure led to higher net sales from this region. Europe recorded a 35% revenue decline on a reported basis to €1,533 million, primarily due to a decrease in Nokia Technologies and Network Infrastructure. Revenues from the Asia Pacific region fell 15% year over year to €683 million due to declining trends in Network Infrastructure, Cloud and Network Services.
North America witnessed a 27% decline on a reported basis to €1,518 million due to soft demand trends in the Mobile Networks and Network Infrastructure. Net sales decreased 17% to €322 million in Latin America due to a decline in IP Networks and Fixed Networks.
Other Details
In the December quarter, the comparable gross margin declined marginally to 43.1% from 43.5% in the year-ago quarter, reflecting lower sales in Network Technologies. However, an improvement in the gross margin of Mobile Networks, Cloud and Network services due to lower variable pay actuals partially reversed this declining trend. The comparable operating profit declined 27% to €846 million ($910.46 million), with a margin of 14.8%.
Cash Flow and Liquidity
Nokia generated €1,870 million ($2,012.48 million) net cash for operating activities in the fourth quarter of 2023. In 2023, the company generated €1,317 million in cash from operating activities compared to €1,474 million in 2022.
As of Dec 31, 2023, the company had €6,234 million ($6,880 million) in cash and cash equivalents, with long-term interest-bearing liabilities of €3,637 million ($3,914.1 million) compared to year-ago figures of €5,467 and €4,249, respectively. By November 2023, it repurchased around 78 million shares at an average price of approximately €3.83 per share.
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 anticipates strong growth in the Network Infrastructure in the second half of 2024, backed by improvement in order intake and multiple deal wins. Progress in U.S. Government initiatives is likely to boost revenues from the Fixed network. However, the normalized pace of investment in India and AT&T’s decision to choose Ericsson for network infrastructure upgradation will continue to impact the top line in the Mobile Networks segment.
Zacks Rank & Stocks to Consider
Nokia currently carries a Zacks Rank #4 (Sell).
Here are some better-ranked stocks that investors may consider.
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.
Workday Inc. (WDAY - Free Report) , carrying a Zacks Rank #2 at present, delivered a trailing four-quarter average earnings surprise of 13.24%. In the last reported quarter, it delivered an earnings surprise of 9.29%.
Workday is a provider of enterprise-level software solutions for financial management and human resource domains. The company’s cloud-based platform combines finance and HR in a single system that makes it easier for organizations to provide analytical insights and decision support.
Arista Networks, Inc. (ANET - Free Report) , 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 delivered an earnings surprise of 12%, on average, in the trailing four quarters.
The company holds a leadership position in 100-gigabit Ethernet switching share in port for the high-speed data center segment. It is increasingly gaining market traction in 200 and 400-gig high-performance switching products and remains well-positioned for healthy growth in the data-driven cloud networking business with proactive platforms and predictive operations.
Note: €1 = $1.07619 (period average from Oct 1, 2023, to Dec 31, 2023) €1 = $1.10364 (as of Dec 31, 2023)
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Nokia (NOK) Misses Q4 Earnings Estimates on Lower Revenues
Nokia Corporation (NOK - Free Report) reported soft fourth-quarter 2023 results, with the top and bottom lines missing the respective Zacks Consensus Estimate. Sluggish demand trends induced by the challenging macro environment, high interest rates and inventory adjustments led to a top-line contraction year over year. Normalization of 5G deployments in India and constrained spending in North America also affected revenues.
Net Income
Nokia registered a net loss of €33 million ($35.51 million) or a loss of €0.01 (a penny) per share in the fourth quarter against an income of €3,152 million or €0.56 per share in the year-ago quarter.
Comparable profit was €568 million ($611.2 million) or €0.10 (11 cents) per share, down from €929 million or €0.16 per share in the year-earlier quarter. The downturn was primarily induced by a sharp decline in net sales year over year. The bottom line missed the Zacks Consensus Estimate of 14 cents.
In 2023, Nokia reported a net income of €679 million or €0.12 per share compared to €4,259 million or €0.75 per share in the previous year. The full-year comparable profit stood at €1,623 million or €0.29 per share compared to €2,481 million or €0.44 per share in 2022.
Nokia Corporation Price, Consensus and EPS Surprise
Nokia Corporation price-consensus-eps-surprise-chart | Nokia Corporation Quote
Revenues
Quarterly net sales stood at €5,707 million ($6,141.82 million), down 23% from €7,449 million in the year-ago quarter. Sluggish demand trends across all verticals impeded revenue growth. Revenues fell short of the Zacks Consensus Estimate of $6,662 million.
In 2023, the company reported €22,258 million in revenues, down from €24,911 million in 2022.
Segment Results
Net sales from Network Infrastructure totaled €2,003 million ($2,155.61 million), down 26% on a reported basis and 24% on a constant-currency (cc) basis. The top line missed our revenue estimate of €2,192.1 million. Revenues from Optical Networks decreased 23% year over year on a cc basis. Weakness in several regions, including Asia Pacific and Europe, affected net sales.
At cc, IP Networks recorded a 25% decline year over year due to cautious spending behavior from communication service providers in North America. Fixed Networks witnessed a 29% decline year over year at cc due to lower fiber investments in Europe and North America. Sales from Submarine Networks were down 10% at cc year over year.
Mobile Networks generated revenues of €2,450 million ($2,636.67 million), down 17% year over year on a reported basis and 14% at cc. Net sales missed our revenue estimate of €2,719.7 million. The segment reported a net sales decline in North America, India and Europe. A slowdown in 5G deployments in Europe and inventory depletion in North America affected the top line in this segment.
Net sales from Cloud and Network Services were €977 million ($1051.44 million), down 8% year over year on a reported basis and 5% on a cc basis. The segment witnessed declining trends in each of its businesses except Business Applications. The top line in this segment beat our revenue estimate of €941 million.
Nokia Technologies contributed €251 million ($270.12 million) compared with €679 million in the year-ago quarter. Net sales declined 63% on a reported basis and 63% at cc. The downturn was mainly induced by a lower net sale from a license that expired in the third quarter of 2023.
Region-wise, net sales from the Middle East & Africa witnessed 9% growth on a reported basis to €646 million. Growth in the Mobile Networks and Network Infrastructure led to higher net sales from this region. Europe recorded a 35% revenue decline on a reported basis to €1,533 million, primarily due to a decrease in Nokia Technologies and Network Infrastructure. Revenues from the Asia Pacific region fell 15% year over year to €683 million due to declining trends in Network Infrastructure, Cloud and Network Services.
North America witnessed a 27% decline on a reported basis to €1,518 million due to soft demand trends in the Mobile Networks and Network Infrastructure. Net sales decreased 17% to €322 million in Latin America due to a decline in IP Networks and Fixed Networks.
Other Details
In the December quarter, the comparable gross margin declined marginally to 43.1% from 43.5% in the year-ago quarter, reflecting lower sales in Network Technologies. However, an improvement in the gross margin of Mobile Networks, Cloud and Network services due to lower variable pay actuals partially reversed this declining trend. The comparable operating profit declined 27% to €846 million ($910.46 million), with a margin of 14.8%.
Cash Flow and Liquidity
Nokia generated €1,870 million ($2,012.48 million) net cash for operating activities in the fourth quarter of 2023. In 2023, the company generated €1,317 million in cash from operating activities compared to €1,474 million in 2022.
As of Dec 31, 2023, the company had €6,234 million ($6,880 million) in cash and cash equivalents, with long-term interest-bearing liabilities of €3,637 million ($3,914.1 million) compared to year-ago figures of €5,467 and €4,249, respectively. By November 2023, it repurchased around 78 million shares at an average price of approximately €3.83 per share.
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 anticipates strong growth in the Network Infrastructure in the second half of 2024, backed by improvement in order intake and multiple deal wins. Progress in U.S. Government initiatives is likely to boost revenues from the Fixed network. However, the normalized pace of investment in India and AT&T’s decision to choose Ericsson for network infrastructure upgradation will continue to impact the top line in the Mobile Networks segment.
Zacks Rank & Stocks to Consider
Nokia currently carries a Zacks Rank #4 (Sell).
Here are some better-ranked stocks that investors may consider.
NVIDIA Corporation (NVDA - Free Report) , currently carrying a Zacks Rank #2 (Buy), delivered a trailing four-quarter average earnings surprise of 18.99%. In the last reported quarter, it delivered an earnings surprise of 19.64%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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.
Workday Inc. (WDAY - Free Report) , carrying a Zacks Rank #2 at present, delivered a trailing four-quarter average earnings surprise of 13.24%. In the last reported quarter, it delivered an earnings surprise of 9.29%.
Workday is a provider of enterprise-level software solutions for financial management and human resource domains. The company’s cloud-based platform combines finance and HR in a single system that makes it easier for organizations to provide analytical insights and decision support.
Arista Networks, Inc. (ANET - Free Report) , 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 delivered an earnings surprise of 12%, on average, in the trailing four quarters.
The company holds a leadership position in 100-gigabit Ethernet switching share in port for the high-speed data center segment. It is increasingly gaining market traction in 200 and 400-gig high-performance switching products and remains well-positioned for healthy growth in the data-driven cloud networking business with proactive platforms and predictive operations.
Note: €1 = $1.07619 (period average from Oct 1, 2023, to Dec 31, 2023)
€1 = $1.10364 (as of Dec 31, 2023)