Nokia is set to announce its third-quarter results on Thursday. Here are the key details you should be aware of:
Net Profit
According to a FactSet analyst poll, Nokia is projected to report a comparable net profit of 399 million euros ($422 million) for the third quarter, a decrease from 551 million euros in the previous year. On a reported basis, the net profit is expected to be 325 million euros for the quarter, down from 428 million euros in the same period last year.
Sales
Sales for the quarter are anticipated to decline to 5.67 billion euros, compared to 6.24 billion euros, as per FactSet data.
Mobile Networks
Following Ericsson’s disappointing networks revenue, Citigroup analyst Andrew Gardiner predicts that Nokia’s mobile networks division will also experience weaker-than-expected sales. This, in turn, has led to Citigroup’s conservative 3Q group revenue estimate of SEK5.39 billion, which is 5% below market consensus. Gardiner explains, “While Nokia is performing well and gaining market share in the radio access market, supporting our medium- to long-term buy investment thesis, we see the near-term market headwinds as more than offsetting.”
Stay tuned for Nokia’s official financial results announcement on Thursday.
Nokia’s 2Q Mobile Networks Margins Decline
Nokia’s mobile networks gross margin for the second quarter dropped from 40.2% to 33.4%. The operating margin at the unit also decreased from 11.2% to 7.9%. This decline in gross margin is primarily attributed to the regional mix and a slower recovery in North America. Nokia expects the gross margin to improve only towards the end of the year. With weaker top line trends, Citi forecasts lower year-on-year margins in mobile networks for the third quarter. The bank predicts a group operating margin of 7.5% for the quarter, compared to Visible Alpha’s consensus of 9.5%.
Downgraded Guidance
Ahead of releasing its second-quarter results, Nokia has downgraded its full-year guidance. The company is currently guiding for net sales between EUR23.2 billion and EUR24.6 billion for 2023, with a comparable operating margin of 11.5% to 13%. Nokia attributes the weaker demand outlook in the second half of the year to both the macroeconomic environment and customers’ inventory digestion. Citi believes that similar to Ericsson, Nokia will also be affected by the weaker global radio access network market, albeit to a slightly lesser extent as Nokia has been gaining market share recently. However, the bank expects Nokia to further reduce its 2023 guidance, mainly due to greater pressure in the key U.S. market.
