Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) is due to publish its 2Q13 results on July 18. Before earnings, Nokia has unveiled its latest Lumia smartphone — the Lumia 1020, which is equipped with a 41-megapixel camera, in its latest bid to catch up with rivals Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930) and Apple Inc. (NASDAQ:AAPL).


Also see: Nokia Lumia 1020 Seems A Very Well Featured Handset: JPMorgan

Banco Santander, S.A. (ADR) (NYSE:SAN) (MCE:SAN)  perceive  a  risk  with  Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V)’s  2Q13 results following weak cash flow performance announced on July 1. This weakness  should  come  from  featured  phones,  while  smartphone business  should  continue to ramp up.  This  could  lead  to  a correction  in  the  stock  following  its  good  recent  performance. However, this does not change their fundamental positive view on Nokia. Santander rating is Buy with a target price of €5.50/share.

Demand For Nokia Lumia Smartphones Will Continue To Ramp Up

Banco Santander, S.A. (ADR) (NYSE:SAN) (MCE:SAN) estimates  that  demand  for Lumia  smartphones  will  continue  to  ramp  up  based  on  a  more complete  portfolio  and  improved  end  demand.  They  estimate volumes  of  7.8mn  smartphones  in  2Q13  (8.0mn  consensus),  of which 7.5mn would be Windows phones, with an ASP of €185.50 (€175 consensus), which means -2.8% QoQ and +22.8% YoY.

Nokia’s Operating  CF in 2Q13

When  announcing  its  agreement  to  acquire Siemens’  50%  stake  in  NSN,  Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) said  that  its  gross  cash position  had  been  reduced  by  €0.4-0.9bn  in  2Q13,  which  could foreshadow  a  weaker-than-expected  quarter.  In  this  connection, market  attention  should  focus  on  Nokia’s  operating  CF  in  2Q13: Banco Santander, S.A. (ADR) (NYSE:SAN) (MCE:SAN) estimates €-231mn  assuming  an  increase  in  working  capital, pointing to higher demand for the coming quarters.

Tough Business Environment in Featured Phones

Banco Santander, S.A. (ADR) (NYSE:SAN) (MCE:SAN)  believe  a  tough business  environment  continued  to  prevail  in  2Q13E  in  featured phones.  They  expect  a  27.9%  YoY  drop  in  volumes  to  53.0mn  in 2Q13E (56mn consensus) and a 1.6% QoQ drop in ASP to €28.00 (€27.60  consensus).  This  should  mean  a  total  drop  of  24.0%  in sales  of  Devices  &  Services  in  2Q13E  (24.2%  consensus)  to €3,059mn and a non-IFRS operating margin of -1.3% in 2Q13E, slightly above Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) ’s guidance of -2% and consensus of -1.8%.

Wall Street and investors are planning on more of the same in the upcoming second-quarter earnings report. It’s expected that before the market opens on July 18, 2013 the consensus opinion is presently losing two cents a share, a very small amount of eight cents (%) over losing ten cents during the corresponding period last year. Analysts are estimating as low as losing 13 cents per share, up to the most optimistic estimate of nine cents per share.