Nokia Corporation (ADR) (NOK) Price Target Raised: Evercore

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Nokia Corporation (ADR) (NYSE:NOK) released solid earnings results on Thursday, exciting investors and sending its share price up by 8%. Analysts still aren’t ready to say everything at Nokia is fixed since the sale of its devices division, but they may be starting to become convinced.

Nokia beats estimates

In a report dated July 24, 2014, Evercore analysts Mark McKechnie and Zachary Amsel said the Finnish company beat their estimates, coming in at 6 euro cents per share in earnings, compared to their estimate of 5 euro cents per share. Nokia’s revenue was €2.9 billion, compared to their estimate of €2.8 billion for the quarter.

They say Nokia’s margins and topline were also better than expectations, with gross margins at 44%, compared to their estimate of 43.5%. The margin was down quarter over quarter, however, due to a higher mix of equipment and a lower mix of software. NSN sales were €2.57 billion with an operating margin of 11%. Results from AT and HERE were basically in line with estimates.

Nokia on track to hit $1.82 per share in net cash

The Evercore team notes that Nokia received about €4.8 billion from Microsoft Corporation (NASDAQ:MSFT) from the devices sale and royalties fees, with about €200 million left. The Finnish company’s net cash rose €4.4 billion or $2.12 per share. They believe Nokia’s net cash will decline by about €1 billion by the end of the 2014 calendar year because of the expected third quarter €1.4 billion dividend payment. That would leave Nokia with €5.5 billion ($7.4 billion) or $1.82 per share in net cash by the end of the year.

NSN returns solid results

The analysts said NSN’s geographical footprint and execution resulted in positive fundamentals. All of the segment’s regions rose quarter over quarter, with the Middle East and Africa leading the way at a 33.1% increase quarter over quarter. North America saw a 16.4% sequential increase, while China rose 10.1% quarter over quarter.

Other positives from Nokia’s release were “healthy RAN activity” and a claim that Nokia was the “only non-Chinese vendor to win a dbl-digit unit share” with China Mobile Ltd. (NYSE:CHL) (HKG:941)’s phase 2 LTE deployment.

Turning more positive on Nokia

The Evercore analysts raised their price target from $8 to $9 per share but maintained their Equal-weight rating on Nokia. They said they’re optimistic on the second half outlook for the company. Nokia raised its guidance for NSN to at or slightly higher than the high end of 5% to 10% for the 2014 calendar year and year over year sales growth in the second half of the year. The Finnish company cited activity in China, Sprint Corporation (NYSE:S) and an acceleration in Europe.

The analysts note that Nokia maintained its €600 million run rate guide for AT sales although it hired a new president for the group. They believe this was to strengthen its efforts to monetize the segment, especially as it continues to renegotiate contracts with Apple Inc. (NASDAQ:AAPL) and Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930). They think these renegotiations are important and “quantified a wide valuation swing of” between $5 billion and $15 billion, which is between $1.25 and $3.75 per share, depending on what the outcome is next year.

Their $9 per share price target for Nokia is a sum of the parts estimate based on %1.82 per share in cash at the end of the current calendar year and $4.7 per share for NSN, $2.03 per share for AT.

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