Lehman Brother analysts Tim Luke and Stuart Jeffrey sent a note to clients recapping the first session of Nokia's (ticker: NOK) Capital Markets Days (Lehman has an 'equal weight' rating on NOK, 'neutral' rating for the sector, and does banking for NOK) -- bullet points:
- Management outlined a positive backdrop for global '06 handset demand at +10% w/NOK aiming to take share, w/slight to modest infrastructure market growth to be accompanied by further share gains & modestly improving margins. At current valuation, we retain constructive bias ahead of what we expect to be a broadly in -ine 4Q & encouraging 1H06 news flow, though we acknowledge some softness in December as news flow dries up and concerns over inventory levels at year end build. [continued below]
- While near-term financial commentary unchanged, management maintains long-term handset operating margin targets of 17-18%, though infrastructure margin estimates were tweaked lower to 13% from 14%.
- R&D to move lower to ~9-10% of sales by year end '06.
- Gross margins: outlook uncertain w/ mixed impact.
- In infrastructure, NOK contines to expect moderate '06 growth w/share & GMs to improv,e helped by push to Asia, M.E. & Africa and W-CDMA traction.
- Share buyback to continue at '05 rate in '06.
- Near-term Lehman's 4Q estimates are for $0.31/share earnings (E0.25) w/GMs down slightly at 34.6% (Vs 34.8% in 3Q).
- Lehman's '06 estimates remain $1.09/share in earnings and $18 price target.
NOK 1-yr chart: