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Nokia (NOK) Q4 Earnings Beat, Revenues Lag Estimates

Finland-based Nokia Corporation 's NOK fourth-quarter 2015 earnings per share (on an adjusted basis) of €0.15 (approximately 16 cents) beat the Zacks Consensus Estimate of 12 cents. Earnings also improved from the year-ago quarter's figure of €0.09 (approximately 11 cents) per share.

Revenues improved 3% year over year to €3.6 billion (approximately $3.94 billion) but lagged the Zacks Consensus Estimate of $4.08 billion. On a constant currency basis, the top line shrunk 3% on a year-over-year basis. A disappointing performance at the Nokia Networks division hurt the top line.

Quarterly adjusted gross margin was 46.4% in the reported quarter compared with 40.8% in the prior-year period. Operating margin improved to 20.3% from 14.3% in the final quarter of 2014. Nokia exited the fourth quarter of 2015 with net cash from operating activities of €460 million, more than double the year-ago figure of €224 million.

Nokia Networks Segment

Total revenue was approximately €3.21 billion (approximately $3.52 billion), down 5% year over year. On a constant currency basis, segmental net sales were down 12%. Even though net sales in Greater China were impressive (up 17% due to strong higher net sales in the Mobile Broadband sub group); sluggish sales in Asia-Pacific (down 12% due to lower sales in Mobile Broadband and Global Services), North America (down 6% due to weak sales in Global Services), Latin America (down 9% due to lower sales in Mobile Broadband and Global Services) and Europe (down 7% due to lower sales in Mobile Broadband and Global Services) hurt the top line, dragging the unit down. The dismal performance in Asia-Pacific was due to weak sales in Japan, Vietnam and Australia. The Mobile Broadband sub-group accounted for 54% of the segmental sales in the reported quarter while the balance came from Global Services. The comparable contribution was 55% and 45% respectively in the third quarter of 2015.

Gross margin expanded 140 basis points to 39.6% in the reported quarter. Quarterly adjusted operating margin came in at 14.6% compared with 14% a year ago.

Nokia Technologies Segment

Quarterly total revenue came in at €403 million (approximately $441.4 million), up 170% year over year. Higher intellectual property income from existing as well as new licenses apart from adjustments from an existing deal boosted segmental sales. Net sales climbed 181% on a constant currency basis. Adjusted operating margin in the reported quarter jumped to 79.9% from 51.7% a year-ago.

Other Developments

In Dec 2015, Nokia completed the sale of the HERE high-definition mapping/navigation business to a consortium of German automakers comprising BMW, Daimler and Volkswagen (the owner of Audi).

Meanwhile, the telecom giant officially took control of rival Alcatel-Lucent ALU in Jan 2016. The deal had been first announced in April last year. The company holds approximately 91% of Alcatel-Lucent shares following the second round of its all-stock offer.

The company said that it still expects to realize annual operating cost synergies of €900 million from the Alcatel-Lucent deal in 2018. Interest reduction on an annualized basis is targeted to be approximately €200 million in 2016, as opposed to 2017 cited earlier. However, Nokia has not provided any guidance for the 2016 net sales of its two divisions. However, sales are expected to slow down in some key markets like China in 2016.

Zacks Rank

Nokia presently carries a Zacks Rank #3 (Hold). Investors interested in the broader Computer & Technology sector may consider Ericsson ERIC and ARRIS International ARRS . Both the stocks sport a Zacks Rank #1 (Strong Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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