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Investors Continue To Punish Ericsson Stock

Investors Continue To Punish Ericsson Stock

There is no respite for Telefonaktiebolaget LM Ericsson (NASDAQ: ERIC) investors, as the stock tanked more than 4 percent following the third-quarter results announcement and tepid outlook for mobile broadband.

There is not much change from what the company disclosed on October 12. The company revealed then that its sales would dip by 14 percent on a year-over-year basis in the third quarter fueled by slower development in segment networks, which recorded 19 percent fall in sales. The lower volumes in segment networks, mobile broadband and increased service resulted in gross margin falling from 34 percent to 28 percent.

On October 21, the company reported sales drop of 14 percent fueled by 19 percent drop in segment networks. Gross margin fell from 33.9 percent to 28.3 percent. On October 12, Ericsson indicated 28 percent gross margin.

Operating margin fell 70 basis points to 8.6 percent in the third quarter to reflect weak margin, partly compensated by lower costs.

Related Link: Ericsson Enters What Is Typically Its Strongest Quarter Under A Cloud Of Uncertainty

The company reported net sales of SEK 51.1 billion and operating income of SEK 0.3 billion for the third quarter. EPS, on non-IFRS basis, dropped from SEK 1.34 to SEK 0.34.

Ericsson president and CEO Jan Frykhammar, commented, "The negative industry trends from the first half of 2016 have further accelerated, impacting Q3 sales, primarily relating to mobile broadband. The decline, in both mobile broadband coverage and capacity sales, was particularly strong in markets with a weak macro-economic environment. In addition, capacity sales in Europe were lower than a year ago. Gross margin declined YoY, following lower mobile broadband capacity sales, a higher share of services sales and lower sales in segment Networks."

Following the results, the stock tanked 4.10 percent to $5.15.

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