Nokia (NOK) To Report Q1 Earnings: What's In The Offing?

Nokia (HE:NOKIA) Corporation (NYSE:NOK) is scheduled to report first-quarter 2019 financial results on Apr 25, before the opening bell. In the last reported quarter, the company delivered a positive earnings surprise of 7.1%.

Let’s find out how things are shaping up prior to the announcement.

The Finnish telecom equipment provider is likely to report lower revenues in the quarter, primarily due to risks arising from delay in project timings and deliveries despite ramp up of 5G deliveries, particularly in North America, Japan and China.

It anticipates 2019 to follow a similar pattern as 2018, a soft first half with a particularly weak first quarter, followed by a strong second half, on the back of 5G acceleration.

What Our Model Says

Our proven model does not conclusively show that Nokia is likely to beat earnings this quarter as it does not possess one of the two key components. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here as you will see below:

Earnings ESP: Nokia’s Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is 0.00% as both are pegged at 3 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Nokia Corporation Price and EPS Surprise

Zacks Rank: Nokia currently has a Zacks Rank #3, which increases the predictive power of ESP. However, the company’s 0.00% Earnings ESP makes surprise prediction difficult.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.

Factors at Play

Nokia had announced organizational changes to accelerate its strategy execution. The company revised its financial reporting structure to better reflect its strategy, organizational structure and the way it evaluates operational performance, starting first-quarter 2019.

As of Jan 1, 2019, Nokia has had three reportable segments — Networks, Nokia Software and Nokia Technologies. It would also disclose segment-level data for Group Common and Other. Within the Networks segment, the company would provide net sales for businesses such as Mobile Access, Fixed Access, IP Routing and Optical Networks.

During the first quarter, Nokia was chosen by the Spanish multinational telco, Telefónica, S.A., as Service Operation Center provider to transform its subsidiary Telefónica UK’s customer-oriented business approach. Nokia’s evolved Service Operation Center platform was put into action for Telefónica UK's 32 million customers.

The company was also selected by the Rakuten Group, a leading e-commerce and Internet-based services provider in Japan, to facilitate smooth transition as a greenfield mobile operator in the country. The collaboration aims to maximize automation, artificial intelligence and machine learning techniques to reduce operating costs compared with legacy networks. The new mobile network would be deployed across Japan, including Tokyo, Osaka and Nagoya.

Furthermore, the company inked a deal with Saudi Telecom Company (STC) to help the 5G network build-out in the region with its advanced products and services. The deal entails several firsts in STC’s network, including the launch of cloud RAN and AirScale, along with the deployment of the Wavence platform in microwave and AirScale indoor radio.

Nokia also inked a multi-year agreement with U.S. Cellular to upgrade 5G network and offer superior end-to-end 5G technology, software and services solutions to customers. Being a key technology partner, it remains committed to working closely with communications service providers while building on technology momentum to help modernize operators’ network.

Despite all these strategic collaborations and service enhancements, the Zacks Consensus Estimate for first-quarter total revenues stands at $5,771 million, due to heavy workload given the scale of the rollouts underway. Notably, Nokia had reported revenues of $6,050 million in the year-earlier quarter. Adjusted earnings per share are pegged at 3 cents. The company reported earnings of 2 cents a year ago.

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:

Juniper Networks, Inc. (NYSE:JNPR) has an Earnings ESP of +10.00% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Comcast Corporation (NASDAQ:CMCSA) has an Earnings ESP of +4.90% and a Zacks Rank #2.

Amazon.com, Inc. (NASDAQ:AMZN) has an Earnings ESP of +10.65% and a Zacks Rank #2.

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