Will Top-Line Expansion Buoy Nokia's (NOK) Q1 Earnings?

Nokia Corporation NOK is scheduled to report first-quarter 2021 results, before the opening bell, on Apr 29. In the last reported quarter, adjusted earnings surpassed the Zacks Consensus Estimate by 5 cents. In the first quarter, the company is likely to have recorded higher revenues year over year, driven by solid traction of 5G radio access products across the globe despite certain COVID-19 adversities.

The Finnish entity’s margins might have jumped on product cost reduction and increased ReefShark shipments. Nokia is committed to strengthening business roadmaps with accretive technological collaborations and delivering long-term financial performance on the back of sustainable cash generation. Higher investments in 5G R&D, fueled by healthy demand for 5G telecommunications equipment for higher deployments, might have acted as tailwinds.

Factors at Play

During the quarter under review, Nokia extended its partnership with Saudi Arabia-based Zain KSA to deploy 60,000 FastMile 5G Gateway 3.1 with eSIM for enhanced connectivity while delivering ultra-high data speeds through 5G and Wi-Fi 6. It inked a deal with Tideworks Technology to deploy its Digital Automation Cloud at the Port of Seattle, Terminal 5 for high-bandwidth and low-latency private networking supported by local edge computing capabilities. It also secured a contract for an undisclosed amount to deploy key infrastructure solutions for Tele2 subscribers in Sweden, Latvia, Lithuania and Estonia.

The company joined forces with M1, a leading telco in Singapore, to deploy its cloud-native core software and support the country’s digital transformation aimed at new 5G use cases for consumers and businesses. The deployment will help accelerate Singapore’s 5G standalone network launch in 2021. Notably, it clinched a five-year deal from T-Mobile to power the latter’s 2.5GHz mid-band spectrum for extensive 5G deployment backed by Nokia’s AirScale Radio platform. It also collaborated with Google Cloud to support digital transformation of businesses at the network edge through both 5G connectivity, and cloud-native applications and capabilities.

During the quarter-to-be-reported, the National Cybersecurity Center of Excellence selected Nokia as the technology provider and collaborator for the 5G Cybersecurity Project. It also powered Saudi Arabia-based Mobily's network with 4G/5G Fixed Wireless Access Network Slicing. It unveiled Service Enablement Platform, the first commercial solution to deliver radio network programmability, Machine Learning and Artificial Intelligence innovation across the Open RAN (O-RAN) ecosystem. In addition, the company secured a five-year deal with the tech giant, AT&T, to deploy the wireless carrier’s C-Band network in parts of the United States. With more than 200 commercial 5G agreements, Nokia currently has 63 live 5G networks, thereby marking a significant feat in the highly competitive market.

Also, coveted deals with some leading companies like Elisa, TDS Telecommunications LLC, A1 Austria, Globe Telecom, Samsung, Turk Telekom, Orange, Microsoft and Amazon Web Services are likely to have positioned Nokia for the ongoing technology cycle, given the strength of its end-to-end portfolio. These developments are likely to have had a positive impact on the company’s top-line performance in the first quarter.

The Zacks Consensus Estimate for total revenues of the company stands at $5,867 million, indicating an 8.3% increase from $5,419 million reported in the prior-year quarter. The consensus mark for earnings of a penny matched the year-earlier quarter’s reported figure.

Key Development in Q1

To better meet customer needs, Nokia revised its financial reporting structure with the creation of four business groups — Mobile Networks, Network Infrastructure, Cloud and Network Services, and Nokia Technologies. Each of these businesses aims to grow market share and margins through technology leadership. It is focused on implementing the new operating model to reduce complexity and increase accountability. Further, it intends to drive growth in new use cases and business models, including enterprise and private wireless to grow faster than the market.

Earnings Whispers

Our proven model does not predict an earnings beat for Nokia this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is not the case here.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Nokia Corporation Price and EPS Surprise

Nokia Corporation price-eps-surprise | Nokia Corporation Quote

Zacks Rank: Nokia currently carries a Zacks Rank #2.

Stocks to Consider

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season:

Caterpillar Inc. CAT is slated to release first-quarter 2021 results on Apr 29. It has an Earnings ESP of +3.15% and currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

EMCOR Group, Inc. EME is scheduled to release first-quarter 2021 results on Apr 29. The company has an Earnings ESP of +10.26% and carries a Zacks Rank #2, at present.

United States Steel Corporation X has an Earnings ESP of +29.67% and a Zacks Rank of 2. The company is set to report first-quarter 2021 results on Apr 29.

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