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Will Revenue Contraction Affect Ericsson's Q3 Earnings Results?
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Ericsson (ERIC - Free Report) is set to release third-quarter fiscal 2024 results on Oct. 15, before the opening bell. In the last reported quarter, the wireless equipment provider missed the Zacks Consensus Estimate by 4 cents.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
The company is expected to report a top-line decline year over year in the third quarter of 2024, owing to a slowdown in network investments in several regions, including India, the Middle East and Africa. Healthy demand in the North America region is a tailwind. Focus on improving working capital management and cost optimization are tailwinds.
Factors at Play
During the quarter, Ericsson inked a multi-year global patent cross-license agreement with OPPO. The multi-faceted agreement involves the exchange of licenses for patents that are crucial for the functioning of cellular technologies, including 5G. This is likely to have supported the net sales during the quarter.
In the quarter under review, Turkcell Communication deployed ERIC’s cutting-edge 5G Cloud Radio Access Network (RAN) technology to boost its network infrastructure. Spark New Zealand Limited also leveraged Ericsson’s state-of-the-art IP Multimedia Subsystem (“IMS”) on the Red Hat OpenStack Platform to enhance network resiliency and improve mobile voice and video calling service. These are expected to have improved ERIC’s third-quarter performance.
In the to-be-reported quarter, ERIC achieved a significant milestone in mobile connectivity that would lay the groundwork for developing 5G advanced technologies in collaboration with Telstra. The testing of ERIC’s RAN Processor 6672 demonstrated immense improvement in network capacity and energy efficiency.
Ericsson’s wholly-owned subsidiary Vonage has formed a collaboration with SAP to explore generative AI use cases through the integration of Vonage’s network Application Programming Interface (API) platform and SAP Business AI. Vonage also introduced an advanced business messaging solution that facilitates more personalized communications in real-time, improving customer service efficiency, streamlining transactions, and boosting conversion rates of marketing campaigns. These developments are likely to be reflected in the upcoming results.
However, constrained spending behavior from operators in some regions, intensifying competition in the wireless equipment market is expected to hinder net sales. Growing geopolitical unrest remains a major concern.
Key Developments in Q3
During the quarter, Ericsson inked a binding agreement with Koch Equity Development to divest its U.S.-based telecommunications solution provider, iconectiv. The transaction, valued at approximately $1 billion, is expected to be completed in the first half of 2025, subject to regulatory approvals and mandatory closing conditions. Upon completion, Ericsson anticipates recording a one-time EBIT benefit of around SEK 8.8 billion.
As the market environment remains uncertain, Ericsson is undertaking various initiatives to reduce costs, optimize its portfolio, and focus on its core telecom equipment business. The divestiture of non-core assets, such as iconectiv, aligns with this strategy. The cash inflow from the sale will bring additional resources for Ericsson, enabling it to navigate through current market challenges, invest in growth initiatives, and improve financial performance.
Overall Expectations
For the September quarter, the Zacks Consensus Estimate for total revenues is pegged at $5.73 billion, indicating a decline from the year-ago quarter’s reported figure of $5.96 billion. The consensus estimate for adjusted earnings per share stands at 9 cents, suggesting growth from 7 cents reported in the prior-year quarter.
Our estimate for revenues from the Networks segment is pegged at SEK 38.09 billion, implying an 8.3% year-over-year decline. For the Cloud Software and Services segment, our revenue estimate stands at SEK 15.8 billion, suggesting a 1.5% increase year over year. Our estimate for revenues from the Enterprise business is pegged at SEK 5.45 billion, implying an 18.9% year-over-year reduction.
Earnings Whispers
Our proven model does not conclusively predict an earnings beat for Ericsson this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. That is not the case here.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is 0.00%, with both pegged at 9 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Ericsson currently has a Zacks Rank #3.
Stocks to Consider
Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season:
The Earnings ESP for T-Mobile US, Inc. (TMUS - Free Report) is +0.70%, and it carries a Zacks Rank of 3. The company is scheduled to report quarterly numbers on Oct. 23.
The Earnings ESP for Qorvo Inc. (QRVO - Free Report) is +0.16%, and it carries a Zacks Rank of 3. The company is scheduled to report quarterly numbers on Nov. 11.
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Will Revenue Contraction Affect Ericsson's Q3 Earnings Results?
Ericsson (ERIC - Free Report) is set to release third-quarter fiscal 2024 results on Oct. 15, before the opening bell. In the last reported quarter, the wireless equipment provider missed the Zacks Consensus Estimate by 4 cents.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
The company is expected to report a top-line decline year over year in the third quarter of 2024, owing to a slowdown in network investments in several regions, including India, the Middle East and Africa. Healthy demand in the North America region is a tailwind. Focus on improving working capital management and cost optimization are tailwinds.
Factors at Play
During the quarter, Ericsson inked a multi-year global patent cross-license agreement with OPPO. The multi-faceted agreement involves the exchange of licenses for patents that are crucial for the functioning of cellular technologies, including 5G. This is likely to have supported the net sales during the quarter.
In the quarter under review, Turkcell Communication deployed ERIC’s cutting-edge 5G Cloud Radio Access Network (RAN) technology to boost its network infrastructure. Spark New Zealand Limited also leveraged Ericsson’s state-of-the-art IP Multimedia Subsystem (“IMS”) on the Red Hat OpenStack Platform to enhance network resiliency and improve mobile voice and video calling service. These are expected to have improved ERIC’s third-quarter performance.
In the to-be-reported quarter, ERIC achieved a significant milestone in mobile connectivity that would lay the groundwork for developing 5G advanced technologies in collaboration with Telstra. The testing of ERIC’s RAN Processor 6672 demonstrated immense improvement in network capacity and energy efficiency.
Ericsson’s wholly-owned subsidiary Vonage has formed a collaboration with SAP to explore generative AI use cases through the integration of Vonage’s network Application Programming Interface (API) platform and SAP Business AI. Vonage also introduced an advanced business messaging solution that facilitates more personalized communications in real-time, improving customer service efficiency, streamlining transactions, and boosting conversion rates of marketing campaigns. These developments are likely to be reflected in the upcoming results.
However, constrained spending behavior from operators in some regions, intensifying competition in the wireless equipment market is expected to hinder net sales. Growing geopolitical unrest remains a major concern.
Key Developments in Q3
During the quarter, Ericsson inked a binding agreement with Koch Equity Development to divest its U.S.-based telecommunications solution provider, iconectiv. The transaction, valued at approximately $1 billion, is expected to be completed in the first half of 2025, subject to regulatory approvals and mandatory closing conditions. Upon completion, Ericsson anticipates recording a one-time EBIT benefit of around SEK 8.8 billion.
As the market environment remains uncertain, Ericsson is undertaking various initiatives to reduce costs, optimize its portfolio, and focus on its core telecom equipment business. The divestiture of non-core assets, such as iconectiv, aligns with this strategy. The cash inflow from the sale will bring additional resources for Ericsson, enabling it to navigate through current market challenges, invest in growth initiatives, and improve financial performance.
Overall Expectations
For the September quarter, the Zacks Consensus Estimate for total revenues is pegged at $5.73 billion, indicating a decline from the year-ago quarter’s reported figure of $5.96 billion. The consensus estimate for adjusted earnings per share stands at 9 cents, suggesting growth from 7 cents reported in the prior-year quarter.
Our estimate for revenues from the Networks segment is pegged at SEK 38.09 billion, implying an 8.3% year-over-year decline. For the Cloud Software and Services segment, our revenue estimate stands at SEK 15.8 billion, suggesting a 1.5% increase year over year. Our estimate for revenues from the Enterprise business is pegged at SEK 5.45 billion, implying an 18.9% year-over-year reduction.
Earnings Whispers
Our proven model does not conclusively predict an earnings beat for Ericsson this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. That is not the case here.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is 0.00%, with both pegged at 9 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 has a Zacks Rank #3.
Stocks to Consider
Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season:
Corning Incorporated (GLW - Free Report) is set to release quarterly numbers on Oct. 29. It has an Earnings ESP of +1.16% and carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Earnings ESP for T-Mobile US, Inc. (TMUS - Free Report) is +0.70%, and it carries a Zacks Rank of 3. The company is scheduled to report quarterly numbers on Oct. 23.
The Earnings ESP for Qorvo Inc. (QRVO - Free Report) is +0.16%, and it carries a Zacks Rank of 3. The company is scheduled to report quarterly numbers on Nov. 11.