Will Lower Revenues Impair Nokia's (NOK) Earnings in Q2?

Nokia Corporation NOK is slated to report second-quarter 2020 results on Jul 31, before the opening bell. In the March-end quarter, the company’s earnings per share were in line with the Zacks Consensus Estimate.

The Finland-based telecom equipment maker is likely to have recorded lower aggregate revenues on a year-over-year basis. This might be primarily due to the negative impact of COVID-19 on the overall market. Nokia expects majority of this impact to have taken place in the second quarter.

Let’s discuss the factors that are likely to get reflected in the upcoming quarterly announcement.

Factors at Play

During the quarter under review, Nokia deployed the world’s first 450 MHz private wireless LTE network for power grid operators in Poland. Also, the company expanded its AirScale portfolio with new product innovations designed to fulfill the evolving needs of 5G networks. Nokia’s audio technology, OZO Audio, was selected by OnePlus to power its OnePlus 8 Pro smartphone.

Nokia was selected by Taiwan Star Telecom as a 5G network provider. The company launched new WaveFabric Elements optical portfolio for the 400G ecosystem to meet rising demands for 5G and cloud. Nokia and Vodafone Idea completed the first phase of the world’s largest deployment of Dynamic Spectrum Refarming in India.

Pakistan Telecommunication Company Limited deployed Nokia’s automation, analytics and machine learning software to improve customer service. China Unicom selected Nokia’s core networking products for 5G. Nokia secured two contracts from China-based webscale giants, Tencent and Baidu, for data center interconnect network solutions. Such developments are likely to have had a positive impact on the company’s second-quarter top line.

Nokia was picked by TOYOTA Production Engineering Corporation to deploy an industrial-grade private wireless network at its manufacturing design center in Fukuoka, Japan. National Broadband Ireland selected Nokia to deploy a fiber broadband solution for 540,000 rural premises. Nokia’s Network Services Platform was chosen by SDN Communications, a leading broadband service provider in South Dakota and southern Minnesota, to provide dynamic control of SDN’s services throughout its IP and optical networks.

For the June-end quarter, the Zacks Consensus Estimate for aggregate revenues is pegged at $5,632 million, which indicates a decline of 12% from the year-ago quarter’s reported figure. Adjusted earnings per share are pegged at 3 cents, which calls for a drop of 50% from the prior-year quarter’s recorded figure.

What Our Model Says

Our proven model doesn’t predict an earnings beat for Nokia 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. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Nokia’s Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is -20.00% as the former is pegged at 2 cents and the latter at 3 cents.

Nokia Corporation Price and EPS Surprise

Nokia Corporation Price and EPS Surprise

Nokia Corporation price-eps-surprise | Nokia Corporation Quote

Zacks Rank: Nokia currently carries a Zacks Rank #2.

Stocks to Consider

Here are some companies that you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Electronic Arts Inc. EA is slated to release first-quarter fiscal 2021 results on Jul 30. It has an Earnings ESP of +4.45% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Apple Inc. AAPL is scheduled to release third-quarter fiscal 2020 results on Jul 30. The company has an Earnings ESP of +4.41% and a Zacks Rank #3, at present.

Marsh & McLennan Companies, Inc. MMC has an Earnings ESP of +3.95% and a Zacks Rank of 3. The company is set to report second-quarter 2020 results on Jul 30.

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