Shares of Nokia(NYSE: NOK) found a crystal-clear wavelength on Thursday, Jan. 25. The Finnish provider of wireless phone network systems and related services reported fourth-quarter earnings early in the morning, sending the stock as much as 12.6% higher after the market open. The raw results were far from impressive, but management made up for the weak financial numbers with bullish commentary on a leaner operating model and improving market conditions.
Feeble financial figures, cheerful commentary
As noted, Nokia's Q4 results weren't great by the numbers. Net sales fell 21% year over year to $6.1 billion, hampered by limited orders from North American clients as they ride out the inflation crisis by tapping into overstocked equipment inventories. Adjusted earnings landed at $0.11 per diluted share, down from $0.16 per share in the year-ago report. Your average analyst expected earnings of roughly $0.15 per share on revenue near $7.1 billion.
On the upside, Nokia's operating margins widened in two of the three main business divisions. The mobile networks margin increased from 6.8% to 11.5%, while cloud and network services reported a 22.8% margin, up from 13.9% one year earlier. Segment-level sales were down across the board, but networks still saw operating profits rise by 45%, and services tallied 56% higher profit results. The cost-cutting program Nokia instituted last year is making a difference here.
Furthermore, Nokia's management reported "a significant improvement in order intake in the fourth quarter, particularly in Network Infrastructure." In other words, the lean years of American inflation worries seem to be ending, at least from this Finnish perspective.
It's time to finish stalled 5G network installations
It's kind of rare to see an earnings report fall a country mile short of analyst expectations, sparking a price jump in the process. In this case, Nokia's bears and critics are backing down as the company seems headed for more stable results in 2024 and beyond.
There are still some hurdles to negotiate, including difficulties exporting European communications infrastructure into China. But if U.S. customers get back to 5G network upgrades in 2024, as Nokia's C-suite comments suggest, the wireless infrastructure sector should see robust growth over the next couple of years. That's great news for longtime Nokia shareholders like yours truly.
Should you invest $1,000 in Nokia Oyj right now?
Before you buy stock in Nokia Oyj, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now... and Nokia Oyj wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than tripled the return of S&P 500 since 2002*.
*Stock Advisor returns as of January 22, 2024
Anders Bylund has positions in Nokia Oyj. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
