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Will Q1 Earnings Be a Disappointment for Nokia (NOK) Stock?

Networking giant Nokia Corporation NOK is scheduled to report first-quarter 2016 results on May 10.

This key player in the field of telecommunications has an impressive history with respect to earnings per share having outshined the Zacks Consensus Estimate in three of the last four quarters. The average earnings beat is 30.21%.

However, things do not look rosy for Nokia as far as the first quarter is concerned.

Our quantitative model too doesn’t point to an earnings beat. Here’s why:

Nokia doesn’t have the right combination of the two key ingredients – positive Earnings ESP and a Zacks Rank #3 (Hold) or better – for increasing the odds of an earnings surprise.

Zacks ESP: The Earnings ESP for Nokia is -66.67%, as the Most Accurate estimate is 2 cents, lower than the Zacks Consensus Estimate of 3 cents.

Zacks Rank: Nokia carries a Zacks Rank #4 (Sell). Note that, we caution against Sell-rated stocks going into an earnings announcement, especially if the company has been seeing negative estimate revisions.

Likely Factors at Play

We expect results to be impacted by foreign currency movements. Sales are expected to be soft in certain key markets like China in the first quarter which will impact the top line. The Nokia Networks Segment is expected to face the brunt of the headwinds, which will likely result in below-par sales.

Moreover, escalated costs should hurt the bottom line. Focus will be on the integration process of the Nokia-Alcatel-Lucent entity. The telecom giant officially took over rival Alcatel-Lucent in Jan 2016 -- the deal which was first announced in April last year.

With Nokia focusing on the growth by acquisition strategy, we expect an update on the issue during the first-quarter conference call. Last month, Nokia announced intentions to buy Withings S.A. The transaction, valued at EUR 170 million, will be settled in cash. The deal is expected to close by Sep 30, 2016. Through this move, Nokia aims to enter the highly lucrative digital health market.

Stocks to Consider

With Nokia likely to disappoint, we present below some players in the broader Computer & Technology sector that are worth considering, as our model shows these too have the right combination of elements to clock an earnings beat:

Agilent Technologies A has an earnings ESP of +2.56% and a Zacks Rank #3. The company is expected to report second-quarter fiscal 2016 results on May 16.

Synopsys SNPS has an earnings ESP of +6.38% and a Zacks Rank #1 (Strong Buy). The company is expected to report second-quarter fiscal 2016 results on May 18.

Voxeljet AG VJET has an earnings ESP of +27.27% and a Zacks Rank #3. The company is scheduled to report first-quarter 2016 results on May 12.

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NOKIA CP-ADR A (NOK): Free Stock Analysis Report
 
SYNOPSYS INC (SNPS): Free Stock Analysis Report
 
AGILENT TECH (A): Free Stock Analysis Report
 
VOXELJET AG-ADR (VJET): Free Stock Analysis Report
 
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