Nokia Corporation (ADR) (NOK) Q1 Earnings Preview

Nokia Corporation (ADR) (NOK) Q1 Earnings Preview
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Nokia Corporation (ADR) (NYSE:NOK) is scheduled to report its first quarter results on April 18th, 2013. Analyts at Credit Suisse expect group sales of  €6.24bn (-22% qoq/-15% yoy) and EPS of €(0.04) vs. consensus at €6.50bn and €(0.04) respectively. According to firm, Nokia Corporation (NYSE:NOK) continues to see limited traction for Windows Phone devices, which combined with increasing risks to its profitable Mobile Phone business from Samsung.

Nokia Corporation (ADR) (NOK) Q1 Earnings Preview

Analysts expect Nokia Corporation (NYSE:NOK) to sell 72.9mn phones in Q1, which includes 4.9mn smartphones (4.7mn Lumia/0.2mn Symbian vs. 4.4mn/2.2mn in Q412) and 68mn mobile phone units, driving D&S revenue of €3.03bn (-21% qoq/-29% yoy). With GMs of 24.3% and opex of €800mn (vs. €870mn in Q412), analysts are looking for a loss of €67mn (OM loss of 2.2% in-line with consensus). With Nokia Corporation (NYSE:NOK) continuing to see limited smartphone traction in spite of product refresh at MWC (Lumia 720/520), and increasing threat from Samsung’s REX feature phones aimed at Nokia’s Asha touch phones, analsysts at the firm believe D&S losses will persist for 2013/2014.

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For NSN, analysts expect sales of €3.07bn with OMs of 4.5% (€138mn profit) which are roughly in-line with consensus. While strength in Japan/Korea markets (analysts estimate these regions accounted for ~20% of sales in 2012 vs. ~15% in 2011) and benefits of cost cutting should provide margin strength in 2013, long term sustainability of close to double-digit OMs remains questionable with declining investments (analysts assume OMs of 8%/7% in 2013/2014).

Nokia’s Cash Flow Problems

With group EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) of c€200mn in Q1, but more than offset by cash restructuring (€350mn), capex, interest, taxes and declining payments from Microsoft, analysts believe that cash burn may be some €400–500mn in Q1. Although the group has net cash of €4.4bn, analysts at the firm believe this to decline from €3.1bn (excl. NSN) in 2012 to €1.6bn by 2014, which remains a concern for CS.

CS maintain their UP rating for Nokia Corporation (NYSE:NOK).

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