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Nokia (NOK) Q2 Earnings Beat Estimates, Revenues Fall Y/Y
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Nokia Corporation (NOK - Free Report) reported mixed second-quarter 2024 results, with the bottom line surpassing the Zacks Consensus Estimate but the top line missing the same. Sluggish demand in several regions, including India, Greater China and Europe led to a top-line contraction year over year. However, multiple deal wins in North America in the Network Infrastructure segment partially supported the top line.
Net Income
Nokia reported a net loss of €142 million ($153 million) or a loss of €0.03 (3 cents) per share in the second quarter against an income of €289 million or €0.05 per share in the year-ago quarter. Non-cash impairment charges of €514 million ($553 million) related to Submarine Networks affected the bottom line.
Comparable profit was €328 million ($353 million) or €0.06 (6 cents) per share, down from €409 million or €0.07 per share in the year-earlier quarter. The downturn is primarily attributed to net sales decline and higher operating expenses year over year. However, the bottom line beat the Zacks Consensus Estimate of 5 cents.
Nokia Corporation Price, Consensus and EPS Surprise
Quarterly net sales stood at €4.47 billion ($4.81 billion), down 18% from €5.43 billion in the year-ago quarter. Demand softness in multiple segments hindered the top line. Revenues fell short of the Zacks Consensus Estimate of $5.11 billion.
Segment Results
Net sales from Network Infrastructure totaled €1.52 billion ($1.64 billion), down from €1.7 billion in the year-ago quarter. The top line missed our revenue estimate of €1.92 billion. At cc, IP Networks recorded a 6% decline year over year, owing to weakness in Europe, Greater China and Latin America region.
Revenues from Optical Networks decreased 18% year over year on a cc basis. Optical Networks continue to witness a slow market recovery compared to the rest of the Network Infrastructure markets. Fixed Networks witnessed an 11% decline year over year at cc. However, a modest net sales increase in North America indicates a return to growth in the region.
Mobile Networks generated revenues of €1.97 billion ($2.12 billion), down 25% year over year on a reported basis and 24% at cc. Net sales beat our estimate of €1.88 billion. A decrease in the 5G deployments in India hindered the top line in this segment. Nokia resolved its outstanding negotiation with AT&T related to previous RAN related contracts. The resolution resulted in a €150 million revenue recognition in the Mobile Networks segment.
Net sales from Cloud and Network Services were €615 million ($662 million), down 17% year over year on a reported basis and 16% on a cc basis. Divestiture of Device Management and Service Management Platform business affected revenues in this segment. The top line in this segment missed our revenue estimate of €700.6 million.
Nokia Technologies contributed €356 million ($383 million) compared with €334 million in the year-ago quarter. Net sales increased 7% on a reported basis and 5% at cc. The uptick was mainly driven by patent license agreements with OPPO and Vivo.
Region-wise, net sales from the EMEA region declined to €1.83 billion from €2 billion in the year-earlier quarter. The 9% downtrend at cc primarily reflects demand softness in each of the networks businesses. Revenues in the APAC region declined to €1.06 billion, down 43% at cc year over year. Sales decreased by 69% at cc in India due to a decline in 5G deployments.
Americas witnessed a 2% improvement at cc to €1.56 billion, backed by growth in IP Networks and Fixed Networks in the Network Infrastructure segment and the resolution of the outstanding AT&T contract in the Mobile Networks business.
Other Details
In the June quarter, the comparable gross margin increased to 44.7% from 40.2% in the year-ago quarter. Strong contribution from Mobile Networks and a favorable regional mix boosted the gross margin. The comparable operating profit decreased 32% year over year to €423 million ($455 million). Comparable operating margin declined to 9.5% from 11.4%, owing to lower net sales and higher operating expenses.
Cash Flow and Liquidity
Nokia utilized €489 million ($526 million) net cash for operating activities in the second quarter of 2024. As of Jun 30, 2024, the company had €6.88 billion ($7.37 billion) in cash and cash equivalents, with long-term interest-bearing liabilities of €2.74 billion ($2.94 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 €550 million.
Despite signal of market recovery and growing order intake in North America, management’s downgraded fiscal 2024 sales growth projection for several segments owing to the persistence of market uncertainty.
For 2024, management expects revenues in the Network Infrastructure segment in the range of -2% to +3% year over year, down from 2-8% growth expected earlier. Mobile Networks estimated sales decline worsened to 19% to 14% year over year from the previous estimation of 15% to 10%. Revenue projection for Cloud and Network Services was revised to -5% to 0% from -2% to +3%.
Zacks Rank & Other Stocks to Consider
Nokia currently sports a Zacks Rank #1 (Strong Buy).
Here are some other top-ranked stocks that investors may consider.
NVIDIA Corporation (NVDA - Free Report) , sporting a Zacks Rank #1 at present, delivered a trailing four-quarter earnings surprise of 18.43%, on average. In the last reported quarter, it delivered an earnings surprise of 11.48%. You can see the complete list of today’s Zacks #1 Rank 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.
Motorola Solutions Inc. (MSI - Free Report) provides services and solutions to government segments and public safety programs, along with large enterprises and wireless infrastructure services. Motorola carries a Zacks Rank #2 (Buy) at present.
It delivered a trailing four-quarter average earnings surprise of 7.54% and has a long-term growth expectation of 9.47%. In the last reported quarter, Motorola delivered an earnings surprise of 11.51%.
Silicon Motion Technology Corporation (SIMO - Free Report) , carrying a Zacks Rank #2 at present, delivered a trailing four-quarter average earnings surprise of 4.72%.
It is a leading developer of microcontroller ICs for NAND flash storage devices. The semiconductor company also designs, develops and markets high-performance, low-power semiconductor solutions for original equipment manufacturers and other customers.
Note: €1 = $1.07631 (period average from Apr 1, 2024, to Jun 30, 2024) €1 = $1.07146 (as of Jun 30, 2024)
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Nokia (NOK) Q2 Earnings Beat Estimates, Revenues Fall Y/Y
Nokia Corporation (NOK - Free Report) reported mixed second-quarter 2024 results, with the bottom line surpassing the Zacks Consensus Estimate but the top line missing the same. Sluggish demand in several regions, including India, Greater China and Europe led to a top-line contraction year over year. However, multiple deal wins in North America in the Network Infrastructure segment partially supported the top line.
Net Income
Nokia reported a net loss of €142 million ($153 million) or a loss of €0.03 (3 cents) per share in the second quarter against an income of €289 million or €0.05 per share in the year-ago quarter. Non-cash impairment charges of €514 million ($553 million) related to Submarine Networks affected the bottom line.
Comparable profit was €328 million ($353 million) or €0.06 (6 cents) per share, down from €409 million or €0.07 per share in the year-earlier quarter. The downturn is primarily attributed to net sales decline and higher operating expenses year over year. However, the bottom line beat the Zacks Consensus Estimate of 5 cents.
Nokia Corporation Price, Consensus and EPS Surprise
Nokia Corporation price-consensus-eps-surprise-chart | Nokia Corporation Quote
Revenues
Quarterly net sales stood at €4.47 billion ($4.81 billion), down 18% from €5.43 billion in the year-ago quarter. Demand softness in multiple segments hindered the top line. Revenues fell short of the Zacks Consensus Estimate of $5.11 billion.
Segment Results
Net sales from Network Infrastructure totaled €1.52 billion ($1.64 billion), down from €1.7 billion in the year-ago quarter. The top line missed our revenue estimate of €1.92 billion. At cc, IP Networks recorded a 6% decline year over year, owing to weakness in Europe, Greater China and Latin America region.
Revenues from Optical Networks decreased 18% year over year on a cc basis. Optical Networks continue to witness a slow market recovery compared to the rest of the Network Infrastructure markets. Fixed Networks witnessed an 11% decline year over year at cc. However, a modest net sales increase in North America indicates a return to growth in the region.
Mobile Networks generated revenues of €1.97 billion ($2.12 billion), down 25% year over year on a reported basis and 24% at cc. Net sales beat our estimate of €1.88 billion. A decrease in the 5G deployments in India hindered the top line in this segment. Nokia resolved its outstanding negotiation with AT&T related to previous RAN related contracts. The resolution resulted in a €150 million revenue recognition in the Mobile Networks segment.
Net sales from Cloud and Network Services were €615 million ($662 million), down 17% year over year on a reported basis and 16% on a cc basis. Divestiture of Device Management and Service Management Platform business affected revenues in this segment. The top line in this segment missed our revenue estimate of €700.6 million.
Nokia Technologies contributed €356 million ($383 million) compared with €334 million in the year-ago quarter. Net sales increased 7% on a reported basis and 5% at cc. The uptick was mainly driven by patent license agreements with OPPO and Vivo.
Region-wise, net sales from the EMEA region declined to €1.83 billion from €2 billion in the year-earlier quarter. The 9% downtrend at cc primarily reflects demand softness in each of the networks businesses. Revenues in the APAC region declined to €1.06 billion, down 43% at cc year over year. Sales decreased by 69% at cc in India due to a decline in 5G deployments.
Americas witnessed a 2% improvement at cc to €1.56 billion, backed by growth in IP Networks and Fixed Networks in the Network Infrastructure segment and the resolution of the outstanding AT&T contract in the Mobile Networks business.
Other Details
In the June quarter, the comparable gross margin increased to 44.7% from 40.2% in the year-ago quarter. Strong contribution from Mobile Networks and a favorable regional mix boosted the gross margin. The comparable operating profit decreased 32% year over year to €423 million ($455 million). Comparable operating margin declined to 9.5% from 11.4%, owing to lower net sales and higher operating expenses.
Cash Flow and Liquidity
Nokia utilized €489 million ($526 million) net cash for operating activities in the second quarter of 2024. As of Jun 30, 2024, the company had €6.88 billion ($7.37 billion) in cash and cash equivalents, with long-term interest-bearing liabilities of €2.74 billion ($2.94 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 €550 million.
Despite signal of market recovery and growing order intake in North America, management’s downgraded fiscal 2024 sales growth projection for several segments owing to the persistence of market uncertainty.
For 2024, management expects revenues in the Network Infrastructure segment in the range of -2% to +3% year over year, down from 2-8% growth expected earlier. Mobile Networks estimated sales decline worsened to 19% to 14% year over year from the previous estimation of 15% to 10%. Revenue projection for Cloud and Network Services was revised to -5% to 0% from -2% to +3%.
Zacks Rank & Other Stocks to Consider
Nokia currently sports a Zacks Rank #1 (Strong Buy).
Here are some other top-ranked stocks that investors may consider.
NVIDIA Corporation (NVDA - Free Report) , sporting a Zacks Rank #1 at present, delivered a trailing four-quarter earnings surprise of 18.43%, on average. In the last reported quarter, it delivered an earnings surprise of 11.48%. You can see the complete list of today’s Zacks #1 Rank 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.
Motorola Solutions Inc. (MSI - Free Report) provides services and solutions to government segments and public safety programs, along with large enterprises and wireless infrastructure services. Motorola carries a Zacks Rank #2 (Buy) at present.
It delivered a trailing four-quarter average earnings surprise of 7.54% and has a long-term growth expectation of 9.47%. In the last reported quarter, Motorola delivered an earnings surprise of 11.51%.
Silicon Motion Technology Corporation (SIMO - Free Report) , carrying a Zacks Rank #2 at present, delivered a trailing four-quarter average earnings surprise of 4.72%.
It is a leading developer of microcontroller ICs for NAND flash storage devices. The semiconductor company also designs, develops and markets high-performance, low-power semiconductor solutions for original equipment manufacturers and other customers.
Note: €1 = $1.07631 (period average from Apr 1, 2024, to Jun 30, 2024)
€1 = $1.07146 (as of Jun 30, 2024)