Nokia Corporation NOK reported decent results in the fourth quarter of 2020, in which the top and bottom lines exceeded the Zacks consensus estimate.
Result
The reported loss (from continuing operations) in the quarter was € 2,608 million or loss of € 0.46 per share against earnings of € 563 million or € 0.10 per share in the same quarter of the previous year. The deterioration was mainly due to a negative net fluctuation in income taxes and lower operating profit.
In 2020, the reported loss was € 2,421 million against a profit of € 18 million in 2019.
Non-IFRS quarterly earnings were € 811 million ($ 967.1 million) or € 0.14 (17 cents) per share compared to € 821 million or € 0.15 per share in the previous year’s quarter. The final result surpassed Zacks’ consensus estimate by 5 cents, showing a surprise of 41.7%.
Nokia Corporation EPS price, consensus and surprise
Nokia Corporation consensus price-eps-surprise-chart | Nokia Corporation quote
Top line
On an informed basis, net sales for the quarter decreased 4.9% year-on-year to € 6,568 million. This was mainly due to the reduction in sales of mobile access.
Net sales declined in four of the six regions on a year-over-year basis – Asia-Pacific, Greater China, Latin America and the Middle East and Africa (down 20%, 10%, 38% and 10%, respectively). It grew 11% in North America. Net sales in Europe remained stable.
In 2020, net sales fell 6.3% year on year to € 21,870 million.
Non-IFRS quarterly net sales were € 6,569 million ($ 7,833.7 million) compared to € 6,903 million in the previous year’s quarter. Revenue exceeded the consensus estimate of $ 7,556 million.
Quarterly segment results
Networks sales (which represent the majority of total revenues) fell 7.3% year on year to € 5,040 million. This was mainly due to Mobile Access and Optical Networks. The decrease in Mobile Access was due to network deployment and planning services. The performance of net sales in Optical Networks was compared to a quarter of the previous year particularly strong. The segment’s gross margin increased 280 basis points (bps) to 37%. The operating margin decreased by 170 bps to 10.6%.
Nokia Software sales fell 0.7% year-on-year, to € 864 million. This was due to Asia-Pacific, Europe, Latin America and Greater China, partially offset by strong performance in North America. The segment’s gross margin fell 290 bps to 56.8%. The operating margin dropped 410 bps to 30.8%.
Nokia Technologies sales increased 26.4% year-on-year to € 292 million. This was driven by increased patent licensing and recovery sales due to a renewed patent license agreement. The segment’s gross margin improved 30 bps to 99.5%. The operating margin dropped 210 bps to 83%.
Common and Other Group sales increased 16.5% year-on-year to € 275 million, driven mainly by Alcatel Submarine Networks. Growth at Alcatel Submarine Networks was driven by strong demand after the closure of factories related to COVID-19 in the first half of 2020. The segment’s gross margin was 3.8%, an increase of 30 bps.
Other details
Overall, the cost of non-IFRS sales decreased to € 3,824 million from € 4,144 million in the previous year’s quarter. Non-IFRS gross profit fell 0.5% to € 2,745 million. Non-IFRS operating profit was € 1,090 million, compared to € 1,134 million in the same quarter a year ago.
Cash flow and liquidity
In 2020, Nokia generated € 1,759 million net cash from operating activities compared to € 390 million in 2019.
As of December 31, 2020, the company had € 6,940 million ($ 8,511 million) in cash and cash equivalents with € 5,015 million ($ 6,150.3 million) of interest-bearing long-term liabilities. This compares with the respective accounts of € 5,910 million and € 3,985 million a year ago.
2021 Outlook
For 2021, Nokia expects net non-IFRS sales between € 20.6 billion and € 21.8 billion. The company expects a non-IFRS operating margin of 7 to 10%. It intends to provide a long-term perspective by Capital Markets Day no later than March 18, 2021.
Zacks Rank & Stocks to consider
Nokia currently carries a Zacks Rank # 3 (Hold).
Some highly rated stocks in the broader industry are Airgain AIRG, Knowles KN and US Cellular USM, each carrying a Zacks Rank # 2 (Buy). You can see the complete list of today’s Zacks # 1 Rank (strong buy) shares here.
Airgain delivered a surprise of positive gains in the last four quarters of 62.5%, on average. The company’s profit has exceeded Zacks’ consensus estimate in three of the past four quarters.
Knowles delivered a positive profit surprise behind four quarters of 12.5% on average.
US Cellular showed a surprise of positive gains in the last four quarters of 231.1%, on average.
Conversion rate used:
€ 1 = $ 1.192521 (average for the period from October 1, 2020 to December 31, 2020)
€ 1 = $ 1.226373 (as of December 31, 2020)
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