Nokia’s stock soared as much as 7.2 percent on Thursday following good results call that caused the firm to raise its second-half forecast.
Net Profit
The company’s comparable net profit for the quarter increased to EUR532 million ($630.1 million), up from EUR311 million a year before. According to FactSet, analysts predicted a comparable net profit of EUR238 million. Nokia’s net profit increased to EUR344 msillion, compared to EUR107 million projected.
Sales
In Q2, top-line momentum continued, with constant currency net sales up 9% year over year, led by growth across all business segments, with Network Infrastructure showing particular strength. Sales increased 4.3 percent to EUR5.31 billion, above analyst expectations of EUR5.15 billion.
Impact of 5G
Nokia’s network Infrastructure business grew across all four of its divisions, while the mobile networks division had substantial growth in 5G, offset in part by older radio access products. The gross margin of mobile networks increased to 40.9 percent from 36.1 percent previous year. The results indicate wide gains, especially in Mobile Networks, which benefited from a one-time software transaction and 5G growth. Shipments of the firm’s 5G technology Reef Shark chips accounted for 54 percent of exports, and the company is on track to meet its 70 percent objective by the end of the year. Nokia’s 5G conversion rate—the percentage of 4G footprint that is converted to 5G—improved marginally to 90%, excluding China. China’s 5G conversion rate has also increased significantly, but it remains around 80%.
Free Cash flow
For the sixth quarter in a row, the company generated positive free cash flow; its liquidity position remained strong, with EUR 3.7 billion in net cash. Nokia’s free cash flow was EUR77 million in the second quarter of 2021, it stated, with high adjusted earnings largely offset by cash outflows linked to net working capital, capital expenditures, restructuring, income taxes, and net interest. It stated that the second quarter of 2021 was the fifth consecutive quarter of positive free cash flow.
Net sales anticipated and other figures
- We have revised our full-year 2021 outlook, with net sales anticipated to be EUR 21.7bn to 22.7bn (previously EUR 20.6bn to EUR 21.8bn) and a corresponding operating margin of 10-12 percent (previously EUR 20.6bn to EUR 21.8bn) (previously 7-10 percent).
- In Q2, the comparable operating margin was 12.8 percent (reported 9.1 percent), with gains across the board, aided by the one-time software transaction in Mobile Networks.
- Q2 diluted EPS comparable of EUR 0.09; reported diluted EPS of EUR 0.06.
- On our three-phased plan, Nokia made significant progress. With a big product introduction that includes several industry-leading features, Mobile Networks is bolstering its competitiveness. In the first half, Network Infrastructure continued to gain market share.
- Throughout the business, new operating model is offering unambiguous responsibility and financial discipline.
Next year’s forecast
The firm raised its forecast for the rest of the year and the next several years. The firm now anticipates net revenues of EUR21.7 billion to EUR22.7 billion for the entire year, up from EUR20.6 billion to EUR21.8 billion before. The adjusted operating margin for the year is now expected to be 10% -12%, up from 7% -10% before, and free cash flow is now expected to be “clearly positive.” “We implemented our strategy quicker than expected in the first half, laying a solid platform for the rest of the year,” stated Chief Executive Pekka Lundmark.
What did analysts say?
Analysts are becoming more optimistic about Nokia, which has received meme-stock attention at times. JPMorgan raised the stock from neutral to overweight earlier this month. Goldman Sachs gave a similar boost in June.
Why did Nokia profitted?
The quarter’s success was attributable to mobile product releases as well as increased market share in 5G network infrastructure, according to the Finnish business. As some western countries avoid Chinese 5G infrastructure, 5G has become a strategic priority throughout the world, benefiting companies like Nokia.
As of 2:18 p.m. ET, Nokia was trading at $6.16, up 4.64 percent on the day.
