The deal has helped spur a hefty 55% earnings increase for Ericsson
Shares of Swedish telecommunications equipment manufacturer Ericsson (NASDAQ:ERIC) rallied 9% higher Tuesday, breaking above $8 in early morning trading as the company released its third-quarter 2024 earnings results.
With the help of a network equipment purchase deal struck with AT&T (NYSE:T) late last year, Ericsson managed to grow its North American sales by 55% year over year.
In December, AT&T agreed to collaborate with Ericsson to build out an open radio access (RAN) network. Chris Sambar, executive vice president of AT&T Network, vowed to “open up radio access networks, drive innovation, spur competition and connect more Americans with 5G and fiber” through the AT&T-Ericsson team-up.
Sales growth seals the deal
In the earnings call, Ericsson CEO Erik Brje Ekholm pointed to the company’s 55% year-on-year North American sales growth, which he suggested has been driven by strong deliveries related to the recent AT&T contract win.
However, the firm’s organic sales declined 1% year over year, partly driven by soft sales in Latin America, Southeast Asia, Northeast Asia, the Middle East. Africa, Australia and India.
Street-beating results, thanks to AT&T
Although Ericsson’s sales results lagged in some parts of the world, it seems that the company’s AT&T-fueled U.S. sales growth enabled Street-beating results in 2024’s third quarter. Thus, Ericsson’s $5.93 billion in quarterly revenue outpaced the analysts’ consensus estimate of $5.73 billion.
In addition, Ericsson posted Q3-2024 net income totaling $366.1 million, which equates to earnings of $0.11 per share. This result beat Wall Street’s call for earnings of $0.09 per share.
Based on these results, Brje Ekholm earned the right to declare that Ericsson “delivered a solid Q3“, noting that the AT&T deal “created the initial groundwork for the accelerating interest that we’re seeing now”.
An undetermined future for Ericsson
AT&T’s contract with Ericsson is expected to last for five years and be worth as much as $14 billion for Ericsson. That’s positive news, but it raises the question of whether Ericsson is overly dependent on AT&T.
There’s also the issue of whether Ericsson can demonstrate meaningful sales growth outside of North America.
These questions may suggest that Ericsson’s near-term future remains undetermined, to a certain extent. For the time being, though, it looks like the market is perfectly content to bid up the Ericsson share price.
