Nokia Corporation (NOK), the world's largest mobile phone maker, is slated to release its first quarter 2012 results on Thursday, April 19, before the opening bell. The current Zacks Consensus Estimate for the first quarter is a loss of 5 cents, representing a decline of 129.7% from the year-ago quarter.
With respect to earnings surprises over the trailing four quarters, Nokia has outperformed the Zacks Consensus Estimate in all the four quarters. The average earnings surprise was a positive 228.53%, implying that the company has outdone the Zacks Consensus Estimate by the same magnitude over the last four quarters.
Fourth Quarter Recap
On January 26, 2012, Nokia reported its fourth quarter 2012 financial results. Quarterly net loss was approximately $1286.9 million or a loss of 39 cents per share compared with a net income of $1,192.5 million or 27 cents per share in the prior-year quarter. However, adjusted (excluding special items) EPS of 8 cents per share in the reported quarter beat the Zacks Consensus Estimate of 6 cents.
Quarterly net revenue was approximately $13,496.7 million, down 21% year over year, but was above the Zacks Consensus Estimate of $13,407 million. Adjusted operating margin in the fourth quarter was 4.8% compared with 8.6% in the year-ago quarter.
Agreement of Estimate Revisions
In the last 30 days, out of the 19 analysts covering the stock, none increased the estimate for the first quarter of 2012 while 13 analysts decreased estimates during the same period. Similarly, for the second quarter of 2012, out of the 19 analysts covering the stock, 13 analysts slashed the estimate while none increased.
For fiscal 2012, in the last 30 days, out of the 23 analysts covering the stock, 14 analysts decreased the estimate. For fiscal 2013, out of the 22 analysts covering the stock, 10 analysts reduced the estimate while none moved the estimate upward.
The analysts with a bearish outlook remain apprehensive about the success of the company's newly launched Windows Phone 7 based Lumia handsets. Moreover, we believe that the continuous loss of market share due to stiff competition from other smartphone manufacturers will further create doubt in the mind of these analysts.
Magnitude of Estimate Revisions
The large number of downward revisions for the first quarter of 2012 pulled down the Zacks Consensus Estimate by 4 cents to a loss of 6 cents. For the second quarter of 2012,the Zacks Consensus Estimate went from earnings of 2 cents to a loss of 4 cents. For fiscal years 2012 and 2013, the Zacks Consensus Estimate lost 19 cents and 14 cents, respectively to touch $0.00 and$0.23, respectively.
Earnings Surprises
The first and second quarter of 2012 represent a 40.00% and 66.67% downside potential (essentially a proxy for future earnings surprises), respectively. Likewise, for fiscal 2012 and 2013it reflects a downside risk of 433.33% and 36.00%, respectively.
Our Take
Continuous loss of market share and stiff competition from Android-based smartphones and Apple Inc's (AAPL) iPhone 4S coupled with lukewarm response for the new Lumia series of Windows-based handsets may act as the headwinds for the stock going forward. Moreover, the company suffered a serious software glitch for the Lumia 900 device, its much hyped first 4G LTE enabled smartphone. Such poor performance may create doubts in the mind of the investors. We thus maintain our long-term Underperform recommendation for Nokia.
Currently, Nokia has a Zacks #5 Rank, implying a short-term Strong Sell rating on the stock.
