Nokia's Fourth Quarter Results

Net Profit

• Analysts predict that Nokia, the Finnish telecom equipment company, will report a comparable net profit of 672 million euros ($729.4 million) for the fourth quarter, a decrease from EUR929 million the previous year.
• The reported net profit for the quarter is expected to be EUR530 million, down from EUR3.15 billion last year. It's important to note that the reported net profit for the previous year was boosted by EUR2.5 billion from deferred tax assets.

• Sales for the fourth quarter are projected to decline to EUR6.28 billion, compared to EUR7.45 billion according to FactSet.

Stock Performance

• Over the past 12 months, Nokia's stock has dropped approximately 27% and is currently trading at EUR3.15.

What to Watch:

Mobile Networks

• With the loss of AT&T as a customer after they signed a contract with rival Ericsson, and considering the challenging global spending environment, JPMorgan analysts anticipate weaker mobile network sales in the fourth quarter. The challenging macro-economic environment and ongoing inventory digestion have impacted Nokia's customers' spending. However, JPMorgan predicts a decline of 7% in mobile network revenue for 2024, offset by growth in technologies.

Margins

• JPMorgan expects Nokia to report a fourth-quarter gross margin of 39.2%, which is 129 basis points below consensus, primarily due to a delay in signing licensing deals. The bank forecasts a fourth-quarter EBIT margin of 13.9%.

Guidance

• Nokia recently issued a warning that it would not meet its 2023 guidance on net sales, comparable operating margin, and free cash flow due to delays in license-renewal discussions. However, the company has signed a license agreement with Chinese smartphone maker Oppo, and net sales from this deal will be recognized in the first quarter of 2024. A licensing deal with Vivo is still pending. Nokia's comparable operating margin target for 2026 is at least 13%, but it still believes that achieving 14% over the longer term is possible.