Nokia Earnings Preview: A Very Tough Q3

Nokia Earnings Preview: A Very Tough Q3

Santander Investment Securities joined the bandwagon of Wall Street analysts who expect that Nokia Corporation (NYSE:NOK) (BIT:NOK1V) will report negative results in its third quarter earnings for the current fiscal year on Thursday, October 28.

According to Carlos Javier Treviño Peinador, an analyst at Santander, Nokia Corporation (NYSE:NOK)’s third quarter earnings report will be “very tough” and there is “little room for positive surprises.”

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Peinador believes the market will focus on the company’s financial position, due to lack of surprises. The research firm expects Nokia to post Eur 435 million operating CF outflow for 3Q 2012, better than the Eur 563 million consensus analyst estimate.

Santander Investment Securities expects Nokia to report Eur 6.96 billion in sales, 22.5 percent lower than its third quarter sales in 2011. The research firm estimated a net profit loss of Eur 546 million, and an EPS loss of Eur 0.15 per share.

Nokia’s estimated sales for Devices and Services in 3Q 2012 will be Eur 3.56 billion, 34 percent lower than its 3Q 2011 sales of Eur 5.39 billion. The company is expected to report a 51.8 percent drop on smartphone sales, to approximately Eur 1 billion; mobile phones sales will also decline by 20.6 percent to Eur 2.3 billion. The Finnish company is also expected to post 5.5 percent and 0.7 percent sales drop in its Networks and Location & Commerce business segments respectively.

According to Peinador, Nokia Corporation (NYSE:NOK)’s sales decline in the smartphone market was negatively affected by the continued drop in the number of Symbian devices, due to transition to its new Windows 8 mobile devices, which will be launched during the fourth quarter this year. Nokia’s estimated smartphone volume would be 7.3 million for the third quarter, of which 3.5 million represents Windows 8 mobile devices.

Peinador wrote, “We expect another weak set of numbers, with market attention mainly focused on operating CF, which we think Nokia Corporation (NYSE:NOK) (BIT:NOK1V) has kept under control.”

Looking forward, Santander Investment Securities believes the introduction of Windows 8 smartphones will provide impact on Nokia, but its effect on the earnings of the company in the 4Q 2012 will be small. The research firm expects Nokia to achieve Eur 4.03 billion sales in Devices and Services in the 4Q 2012.

For the Nokia Corporation (NYSE:NOK)’s 4Q 2012 earnings, Peinador said, “We expect a very modest improvement, with still strong volatility for Nokia’s stock, which makes it a risky investment option, despite significant fundamental value.”

Peinador initiated a “hold” rating for Nokia Corporation (NYSE:NOK) (BIT:NOK1V) stock with a target price of Eur 5.55 per share.