Nokia Corporation (ADR) (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) networks revenue is expected to grow by 3% year over year in the second half of 2014. However, with easy comps, new contracts and potential positive impact from the strong dollar, Nokia is expected to beat the network sales estimates. In a report dated 17 September 2014, J.P Morgan analysts Sandeep Deshpande, Chetan Udeshi, Rod Hall and Ashwin Kesireddy believe “the beat will provide continuing momentum for stock till IPR monetization.”
Nokia has solid projects ahead
On average analysts are expecting 3% year over year growth in the second-half compared to 2.6% year over year sales growth in the second-half of last year, before the quarter results. The company has a strong pipeline of new projects that will advance in the second half. Some major projects are Sprint (2.5 Ghz radio), Vodafone Spring contract, EE 4G, Telefonica 4G, LTE-Advanced upgrade at KDDI and the ongoing China Mobile 4G contracts. On this basis, analysts expect an upside to the 3% consensus estimate.
The analysts are assuming a surge of 5% in the network sales growth for the second-half of 2014, and 250 basis points decline in the network gross margin in the second-half of 2014 due to the dilution from new projects. For networks division, analysts are expecting an upside of 7.6%/4.3% to second-half and full-year EBIT consensus. If network grows 5% year over year and gross margin drop by 150 basis points in the second-half of 2014, then networks division EBIT consensus could have an upside of 16.6%/9.4% for 2H/FY14.
J.P. Morgan analysts have an Overweight rating on Nokia with a price target of €8.00.
Nokia prepping 5G in Finland
Recently, Nokia announced that it is testing to build an early 5G network in the North of Finland. Lauri Oksanen, VP of technology and research at Nokia Networks said that various possibilities of the 5G test bed in Oulu are being considered for the LTE Evolution. Oksanen said that 5G research is still in the process, and the concept itself is not standardized and will be available only in the next decade.
Finish broadcaster YLE reported that there was a discussion over the plans during an event Northern Glow in Oulu, a city in the north of Finland, and the team is examining different aspects of the feasibility of the project.