-Earnings Preview
By Juhana Rossi
Sweden's Ericsson (ERIC), the world's leading telecom-equipment
supplier, is scheduled to announce its fourth-quarter results on
Tuesday, Jan. 27 at 0630 GMT. Here's what you need to know:
EARNINGS FORECAST: The median estimate for fourth-quarter net
profit is SEK4.56 billion ($547 million), according to an analyst
poll compiled by Reuters, down 29% from SEK6.41 billion in the
year-ago period. The median estimate for fourth-quarter per-share
earnings is SEK1.39. Ericsson issues no financial guidance.
REVENUE FORECAST: The median analyst estimate for revenue in the
October-to-December quarter is SEK69.56 billion, up 4.5% from a
year ago.
NOTE: Ericsson closed an IPR licensing deal with Samsung in
early 2014, and recorded the income from this deal as a part of its
earnings in the fourth-quarter of 2013. The one-off positive impact
on Ericsson's net sales was SEK4.2 billion and net profit SEK3.3
billion.
WHAT TO WATCH:
--SPENDING BY OPERATORS: On the surface, year-end developments
appear to have gone against Ericsson: Operator capital expenditure
has been waning in the U.S., a key market, while it has remained
robust in China, where Ericsson holds a relatively small market
share. However, Ericsson's sales have grown in India, the Middle
East and in parts of Europe, and should compensate for slower sales
growth in the U.S.
--FAVORABLE FX MOVEMENTS: The Swedish krona depreciated 17%
against the dollar in 2014, and 8% during the October-to-December
quarter alone. The substantial weakening of the Swedish krona vs.
the dollar provides a strong boost to Ericsson's sales and
earnings. During the fourth quarter, this favorable currency is
expected to have been offset in part by hedge accounting losses
amounting to SEK1 billion, but the currency-linked tailwind for
Ericsson is expected to show its full force during 2015.
--COST CUTS & APPLE: Ericsson said in November that its
profit level and growth rate are "not satisfactory." To address
this weakness it plans to cut costs by SEK9 billion by 2017.
Investors will be looking for information about how the company
will do this. Earlier in January Ericsson and Apple started a legal
battle over royalties for Ericsson's patents linked to wireless
technology the Apple uses in its mobile devices. Investors are keen
hear how the dispute and its outcome could affect the value of
Ericsson's patent portfolio in the future.
Write to Juhana Rossi at juhana.rossi@wsj.com; Twitter:
@WSJNordics
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