Nokia's Disappointing Outlook: Analysts Sound the Alarm

Strategic Insights -

Nokia Corp.'s disappointing earnings results and increasing competition from Research In Motion (RIMM), Apple Inc. (AAPL), and Google Inc. (GOOG) have sent shockwaves through the market. Analysts are highly concerned about Nokia's failure to penetrate the lucrative smartphone market, resulting in a pessimistic earning revision trend.

Key Takeaways:

  • Nokia's first quarter earnings per share (EPS) were a penny below the Zacks Consensus Estimate, with revenues lagging more than 5% due to lower-than-expected mobile devices sales.
  • The company shipped 21.5 million smartphones in the first quarter, but its market share is being eroded by RIMM, AAPL, and GOOG's smartphones.
  • Quarterly average selling price (ASP) of the Mobile Devices was around $83.5, down 6% year over year and 3% sequentially.
  • Management expects an operating margin of 11-13% in the core Devices and Services segment, down from previous expectations of 12-14%.
  • 17 out of 24 analysts covering the stock reduced their estimates for the June quarter, and 16 out of 28 analysts reduced their estimates for the September quarter.
  • 24 out of 28 analysts covering the stock reduced their estimates for full fiscal 2010, and 21 analysts reduced their estimates for full fiscal 2011.

Statistics:

  • EPS: $0.26 (below Zacks Consensus Estimate of $0.27)
  • Revenue: $9.30 billion (below Zacks Consensus Estimate of $9.75 billion)
  • Quarterly ASP: $83.5 (down 6% year over year and 3% sequentially)
  • Operating margin: 11-13% (down from previous expectations of 12-14%)

Sources:

1. Zacks.com, "Nokia Corp.'s Earnings Decline: What's Next?", April 20, 2010.

2. Zacks Equity Research, "Nokia Corp.'s Fiscal 2010 Outlook: Disappointing Trends", March 29, 2010.

3. Zacks.com, "Zacks Consensus Earnings Estimate", accessed April 20, 2010.

4. Zacks.com, "Profit from the Pros" newsletter, April 20, 2010.