Nokia Gains on Earnings Beat as Investors Shrug Off Chip Caution
(Bloomberg) -- Nokia Oyj shares increased after third-quarter profit beat expectations with investors shrugging off management warnings over component prices and shortages beginning to weigh on profitability.
The shares rose as much as 5.5% in Helsinki, the most since July, adding about 1.2 billion euros ($1.4 billion) of market value. Earlier on Thursday, Nokia reported adjusted operating profit of 633 million euros, beating the highest analyst estimate. The networks maker also reiterated its full-year guidance amid an ongoing push by operators to upgrade mobile infrastructure to 5G.
The share reaction shows investors are not taking much notice of management warnings that shortages and rising prices of components are set to cast a shadow over the rest of the year and into 2022.
“Nokia is in good shape and progressing ahead of market estimates in many of the key performance indicators,” Kimmo Stenvall, an analyst at OP Group in Helsinki, said by phone. The report showed “very solid results but a little bit shadowed by the comments on 2022 from the CEO that the component shortages and cost inflation might hinder profit development next year.”
The report is the latest indication that efforts to turn around the company, initiated before the pandemic, are paying off. Nokia is taking market share in 5G and its products are becoming more competitive against rivals.
Chief Executive Officer Pekka Lundmark, who was brought in to right the course in mid-2020, rejected his predecessor Rajeev Suri’s so-called end-to-end strategy to sell entire suites of systems including hardware and software, in favor of a proposition to focus on best-in-class products and sell gear in a more piecemeal fashion. He’s also unveiled a plan to slash the workforce by as many as 10,000 employees.
Nokia could have grown faster this quarter without the chip shortages, Lundmark said, repeating a comment he’d made in July. The company is working “relentlessly” to ensure availability and minimize impact of higher costs on margins, he said.
“We are currently not limited by market demand and we are not limited by our production capacity, we have enough capacity,” he said in an interview. “But we don’t get enough components.”
Read More on the CEO’s Views on the Supply Crunch
- Third-quarter net sales came to 5.4 billion euros, slightly above an average analyst estimate of 5.39 billion euros.
- Nokia reiterated its guidance for a comparable operating margin of 10% to 12% in 2021 and sales of as much as 22.7 billion euros, and said it now expects to be toward the upper-end of the margin range.
- See more of the third-quarter numbers here.
- Read more on rival Ericsson AB’s earnings.
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