Nokia's Q3 Profit Rises Amid Declining Net Sales

Nokia's recent report reveals a rise in quarterly profit, attributed to a 24% increase in comparable profit from continuing operations. However, a significant decline in net sales raises concerns about growth prospects and could impact investor sentiment toward the stock.

Date: 17-10-2024

AI Rating: 5

The report outlines several key financial metrics for Nokia (NOK) that could influence stock prices. Firstly, the earnings per share (EPS) for the third quarter increased to 0.03 euros, up from 0.02 euros in the same quarter last year, reflecting a positive trajectory in the company's profitability.

However, while the company reported a significant rise in comparable profit from continuing operations to 358 million euros from 293 million euros in the previous year, other indicators suggest challenges. Notably, net sales for the third quarter decreased to 4.33 billion euros, down from 4.71 billion euros year-over-year, marking a decrease of 7% in constant currency and 8% on a reported basis. This decline can raise concerns about Nokia's growth potential moving forward.

The report indicates that the company’s profit margins are under pressure amidst a slower net sales recovery, although there is partial offsetting against improving gross margins and operational cost management.

Nokia's free cash flow (FCF) outlook appears optimistic, as the company expects to stay at the high end of a 30% to 60% conversion target from comparable operating profit. This could potentially provide a buffer for future investments and support dividend payments.

In light of its acquisition plans for Infinera and ongoing share repurchase program, the commitments indicate management's focus on shareholder value, despite facing top-line pressures.

While the increase in EPS and comparable profit is a positive sign, the drop in net sales is a critical factor that could weigh on investor sentiment and ultimately affect stock prices.

Stocks: NOK