Earnings Preview: Nokia Corp. - Analyst Blog

Nokia Corp. (NOK), the largest mobile phone manufacturer of the world, will declare its first quarter 2010 financial results on April 22, before the market opens. As on date, Nokia commands the majority market share (39%) of mobile phones throughout the world and is way ahead of its nearest rivals - Samsung Electronics (21%) and LG Electronics (11%). In the high-end smartphone market, Nokia’s global market share was 40% in the previous quarter compared to 20% for Research In Motion (RIMM) and 16.5% for Apple Inc. (AAPL).
 
Solid Market Foothold
 
In recent times, management has taken a series of measures to revamp the core businesses to regain past glory. Enrichment of the company’s smartphone portfolio (especially for the masses) with innovative products, related diversification into the small laptop market, and introduction of mobile money transfer facilities are likely to benefit the company’s financials in the future. We also believe, the struggling Nokia Siemens Network, a 50-50 joint venture between Nokia and Siemens AG (SI) has started showing initial signs of a turnaround.
 
Estimate Revisions Trend
 
The overall trend in estimate revisions is mixed. Over the last 30 days, 2 out of 25 analysts covering the stock have raised their earnings estimates for the first quarter of 2010 while 1 has moved in the opposite direction. For full fiscal 2010, 4 of the 29 analysts covering the stock have raised their earnings estimates during the last 30 days whereas 5 analysts have made downward revisions of their estimates.
 
Currently, the Zacks Consensus Estimate for the first quarter 2010 earnings is 20 cents per share, which is a substantial improvement of 53.2% over the prior-year quarter. The current Zacks Consensus Estimate of $1.05 per share for full fiscal 2010 earnings also indicates an improvement of 13% year-over-year.
 
As a result of the mixed trend in earnings estimate revision, the Zacks Consensus Estimate has moved up by 1 cent in the last 30 days for both the first quarter 2010 and full fiscal 2010.
 
With respect to earnings surprises, Nokia’s track record is fairly encouraging due to the average earnings surprise of 19.3% in the last four quarters, which means that the stock has outperformed the Zacks Consensus Estimate by that measure over the last year.
 
The current Zacks Consensus Estimate of 20 cents for the first quarter 2010 contains an upside potential (essentially a proxy for future earning surprises) of 5%. However, with respect to full fiscal 2010, there does not exist any upside or downside potential.
 
Our Recommendation
 
Nokia is trying hard to regain its lost glory and its comeback effort has started to make some headway. Expected recovery of the global economic condition in 2010 may serve as a catalyst for the company. However, in our assessment, these positives are already reflected in the current valuation leaving little room for above-market gain. We therefore maintain a Neutral recommendation for Nokia.

Read the full analyst report on "NOK"
Read the full analyst report on "SI"
Read the full analyst report on "RIMM"
Read the full analyst report on "AAPL"
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