Nokia Wins a Series of Deals on High Global LTE Demand - Analyst Blog

On Nov 17, 2014, we issued an updated research report on Nokia Corporation (NOK). Strong demand for 4GLTE network deployment across the globe coupled with continuous contract wins are factors driving growth for the company.

 

Nokia delivered positive earnings surprises in all four quarters last year, with an average beat of 46.28%. Meanwhile, the company reported impressive financial results for the third quarter of 2014, wherein both the top and the bottom line surpassed the Zacks Consensus Estimate.  

 

In the third quarter, all three segments of Nokia witnessed nearly double-digit revenue growth mainly buoyed by massive demand for 4GLTE across the globe. Moreover, the HERE segment achieved solid revenue growth mainly driven by strong auto sales and contracts from the company's major customer, Microsoft (MSFT).

 

Substantial demand for 4GLTE network across China and the rest of the world coupled with high capital expenses associated with network restructuring in India, Korea and Indonesia may create additional opportunities for the company. Owing to this, Nokia has been winning network upgrade contracts on a regular basis. 

 

Recently, the company cut a deal with Vodafone's New Zealand division to install a 700 MHz based LTE network. Meanwhile, Nokia signed an LTE network deployment contract with Olleh Rwanda Networks. Further, the company's NSN segment struck a network upgrade deal with Hutchison Whampoa's Irish mobile network subsidiary.

 

However, the NSN segment continues to face stiff competition from network deployment players like Huawei and Ericsson (ERIC). These companies command a superior position in the telecom infrastructure market with a high number of contract wins in China. Hence, to remain competitive, Nokia continues to incur high research expenses, which we believe will impact margins while moving ahead. Moreover, payment of dividends coupled with continuous share repurchase plans will further dent the cash balance of the company.

 

Stocks That Warrant a Look

 

Nokia currently carries a Zacks Rank #3 (Hold).

 

Other better-ranked stocks worth considering in this sector include BlackBerry Ltd. (BBRY) and Mitel Networks Corp. (MITL), both of which have a Zacks Rank #2 (Buy).