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Nokia share price jumps 13% on improved 5G prospects

Nokia CEO Rajeev Suri has boasted of improvements to the radio portfolio, as the team bumps up full-year guidance.

The last time Suri addressed the market, it was a low point for Nokia. The accountant’s spreadsheets were taking a beating while customers were showing preference for rivals. There was a risk that Nokia would no-longer be considered in the top tier of network infrastructure vendors, perhaps being replaced by Samsung, but these fears seemed to have been eased.

“Nokia delivered a strong improvement in Q2, with better-than-expected profitability, significant improvement in cash generation, clear indications of a return to strength in mobile radio, and a year-on-year increase in earnings-per-share, despite the challenges of COVID-19,” Suri said.

“These results show that our execution has improved as planned and that we are well positioned to end the year with a significantly stronger financial position. As a result, we are adjusting upward both the midpoint of our full-year 2020 non-IFRS EPS and operating margin guidance within our previously disclosed outlook ranges.”

Nokia financial results for period ending June 30 (in millions, €)
Category 2020 Q2 Year-on-year
Total revenue 5,093 -11%
Operating profit 423 -6%
Operating margin 8.3% 40bps
Diluted EPS €0.06 +20%

Having beating analyst expectations for operating profit by more than €100 million, the company does seem to be in a slightly healthier position than some would have hoped. This will be the final earnings call for CEO Suri, who will be replaced by Pekka Lundmark this weekend, and it is not necessarily in the world place possible.

Although sales and profits are down, that was to be expected as the demand for 5G equipment lulled during the coronavirus pandemic. The positives from this earnings call clearly outweigh the negatives, as shown by the 13% surge in share price.

With the costs of its mobile radio portfolio coming down, while performance is improving, the engineering mistakes of yesteryear are seemingly being corrected. Nokia has often been overlooked as a supplier due to the cost and performance of its products, but with Huawei getting banned in markets all over the world, it is a good time to be an established RAN player.

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