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Nokia, Alcatel-Lucent higher after EPS beats; margins, cash flow jump (updated)

Feb. 11, 2016 12:37 PM ETNokia Oyj (NOK) StockNOKBy: Eric Jhonsa, SA News Editor13 Comments
  • Though the S&P is down 1.9% and the Euro Stoxx 50 3.9%, Alcatel-Lucent (ALU +3.6%) and (to a lesser extent) Nokia (NOK +0.4%) remain higher after delivering Q4 EPS beats aided by a weak euro and substantial margin gains.
  • Nokia's Q4 financials: Gross margin rose 560 bps Y/Y to 46.4%, and op. margin 600 bps to 20.3%. Networks op. margin rose 60 bps to 14.6%; Technologies op. margin rose 2820 bps to 79.9%, aided by "non-recurring adjustments from an existing agreement" (Samsung?). R&D was 15% of revenue, and SG&A 11% (same as a year ago).

    Op. cash flow rose to €460M from €224M a year ago. With the help of the HERE sale, Nokia ended Q4 with €7.8B in net cash and other liquid assets. Forex provided a 600 bps revenue growth boost (+3% vs. -3%).
  • Alcatel's Q4 financials: Gross margin rose 470 bps Y/Y to 39.4%. Op. margin rose 580 bps to 13.5%. SG&A spend rose 14% Y/Y to €477M, and R&D spend 4% to €603M.

    Excluding restructuring cash outlays, free cash flow rose to €1.14B from €420M. Net cash rose to €1.4B. Forex provided a 900 bps revenue growth boost (+13% vs. +4%).
  • Top-line performance: Nokia Networks revenue fell 5% Y/Y to €3.2B, with Mobile Broadband dropping 2% and Global Services 6%. With Samsung's help, Nokia Technologies revenue rose 170% to €403M.

    Alcatel-Lucent's IP routing (carrier routers, gaining share) revenue rose 17% to €778M, IP transport (optical networking) 19% to €772M, and IP platforms (telecom software) 2% to €497M. Wireless access (mobile infrastructure) revenue rose 14% to €1.38B, and fixed access (broadband equipment) 21% to €666M. Managed services fell 36% to €61M, and licensing 33% to €10M.
  • Guidance: Nokia has declined to provide formal guidance for Networks and Technologies, while citing the Alcatel deal for the former. The company does say it expects a "flattish capex environment" for its addressable market in 2016, and a declining 2016 wireless infrastructure market with a greater-than-normal Q1 seasonal decline.

    Nokia is still aiming for €900M/year in merger cost synergies in 2018, and now forecasts achieving €200M/year in interest expense savings in 2016; prior guidance was for 2017.
  • Nokia: Q4 results, earnings release (.pdf).
  • Alcatel-Lucent: Q4 results, earnings release
  • Update: Also of note: Nokia's board is proposing a €0.10/share special dividend (€600M payout) to go with a €0.16/share 2015 dividend (€960M payout).

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