Ericsson Q3 Earnings Beat Estimates - Analyst Blog
October 24 2013 - 1:00PM
Zacks
Ericsson (ERIC)
reported Non–IFRS earnings (excluding losses due to divestments and
exiting the telecom and power cable operations) of SEK 1.31 (20
cents) in the third quarter of 2013 compared to the Zacks Consensus
Estimate of 18 cents. Earnings grew 26% year over year driven by
lower operating costs and higher gross margins.
Revenues
Revenues in the quarter declined 3%
year on year and 4% sequentially to SEK 53.0 billion ($8.1
billion). Revenues were primarily impacted by currency fluctuations
and weak sales in North East Asia as well as India.
Segment
Details
Sales in Networks
contracted 1% year over year and declined 5% sequentially. During
the quarter, the segment was impacted by lower sales in North
America. In North East Asia, GSM (Global System for Communication)
investments continued to decline in China and Japan continued to be
negatively impacted by currency as well as due to reduced activity
since the company has almost completed a major project.
Global Services
sales declined 1% year over year and 4% sequentially. The decline
in revenues was primarily due to the foreign currency translation.
After adjusting foreign exchange impacts, revenues grew 3% year
over year driven by increased activity in North America. Demand for
professional services is on the rise with operators increasing
their operational efficiency and reducing operating expenses
through transformation activities in the voice, IP and OSS/BSS
domains.
Support Solutions
sales for the quarter contracted 29% year over year, but grew 1%
sequentially. The year-over-year decline in sales was primarily
attributable to divestments as well as portfolio changes and lower
sales of compression technology. However, OSS sales continued to
grow both on year-over-year and sequential basis.
Margins and Balance
Sheet
Gross margin increased 160 basis
points (bps) to 32.0% supported by lower share of network
modernization projects in Europe and somewhat improved business
mix. However, on a sequential basis, gross margin declined from
32.4% to 32.0%.
The operating margin for the
quarter was 8.1% versus 6.7% in the prior-year quarter and 4.5% in
the previous quarter. The year-on-year decline was due to
unfavourable impact of currency translations.
Cash, cash equivalents and
short-term investments amounted to SEK 60.7 billion ($9.3 billion).
The net cash position during the quarter decreased to SEK 24.7
billion ($3.8 billion) primarily due to increased working capital
and acquisitions.
Ericsson currently has a Zacks Rank
#2 (Buy). Also, some other stocks such as Motorola
Solutions (MSI), Novatel Wireless Inc.
(NVTL) and Qualcomm Inc. (QCOM) carry the same
rank.
1SEK=$0.15266
ERICSSON LM ADR (ERIC): Free Stock Analysis Report
MOTOROLA SOLUTN (MSI): Free Stock Analysis Report
NOVATEL WIRELES (NVTL): Free Stock Analysis Report
QUALCOMM INC (QCOM): Free Stock Analysis Report
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