Nokia (GB:0HAF) (NOK) shares jumped over 9% on July 21 to close at €5.12 after the multinational telecommunications, information technology, and consumer electronics company delivered impressive second-quarter results. Nokia also reaffirmed its FY2022 guidance, in contrast to the slashed outlook by peers.
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Investors cheered the optimistic management commentary, which implied that the company is confident in achieving its full-year outlook towards the “higher-end” of the sales range as well as at the mid-point of the operating margin range.
Nokia’s Q2 Beat
Adjusted earnings of €0.10 per share grew 11% year-over-year and beat analysts’ expectations of €0.08 per share. The company reported earnings of €0.09 per share for the prior-year period.
Further, net sales jumped 11.1% year-over-year to €5.9 billion and exceeded consensus estimates of $5.61 billion.
The sales growth reflects a surge in Network Infrastructure sales, which gained 21% to €1.153 billion. Further, a 9% and 7% growth in Mobile Networks and Cloud and Network Services, respectively, offset the 24% decline in Nokia Technologies sales.
However, comparable operating margin of 12.2% was modestly lower by 60 bps year-on-year due to timing effects of contract renewals in Nokia Technologies and a one-off software deal in Mobile Networks in the prior year.
Nokia Reiterates FY2022 Outlook
Based on robust Q2 results, management reiterated the financial guidance for FY2022.
The company continues to forecast net sales to be in the range of €23.5 billion to €24.7 billion. Further, the company expects comparable operating margin to hover in the range of 11% to 13.5%.
Nokia CEO’s Comments
Nokia CEO, Pekka Lundmark, said, “There remain risks around timing of Nokia Technologies’ contract renewals, potential COVID-19 lockdowns and the supply chain which remains challenging but is showing signs of improvement.”
Looking optimistic about the future, he further added, “We are currently tracking towards the higher-end of our net sales guidance and towards the mid-point of our operating margin guidance as we manage ongoing inflation and currency headwinds.”
Wall Street is Bullish on Nokia
Following the impressive quarterly earnings, CFRA upgraded Nokia to Buy from Hold.
Wall Street is also optimistic about Nokia, with a Strong Buy rating based on seven Buys and two Holds. The average Nokia price target of €6.15 indicates an upside potential of 23.57%.
High Smart Score for NOK
NOK scores a 8 out of 10 on TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.
Concluding Thoughts
Nokia shares are down 10% over the past year, almost in tandem with the benchmark performance.
Management sounded bullish based on resilient demand, an expected easing of the supply constraints in the second half, and the ability to pass on the inflationary effect to new contracts.
Investors favored the guidance that was reaffirmed on the profitability front despite the industry-wide inflation and supply chain challenges, leading to profit warnings by peers.
