Ericsson (ERIC) Q2 Earnings Miss, Outlook Grim, Shares Down
Zacks Investment Research | Jul 17, 2017 11:04PM ET
In its second-quarter 2017 results, Ericsson (BS:ERICAs) (NASDAQ:ERIC) reported non-IFRS earnings of SEK 0.17 (2 cents) per share (excluding amortizations, write-downs of acquired intangible assets and restructuring charges). This is down from earnings of SEK 0.83 recorded in the comparable quarter last year. Declining sales and shrinking gross margins put immense pressure on the bottom line.
The figure also compared unfavorably with the Zacks Consensus Estimate of earnings of 5 cents, marking the sixth consecutive earnings miss for the Swedish communication technology and services giant.
Investors sent the stock tumbling 10.7% at one point in pre-market trading, as the company cautioned that fragile market conditions and shrinking telecoms equipment market could hit its profits by as much as $600 million over the next year. Ericsson also warned that getting the beleaguered company back on the profitability track would call for even steeper cost cuts.
Contracting product demand, lower software sales and weak IT & Cloud business results pushed the company’s earnings into the red, as the Swedish firm reported a net loss of SEK 1 billion ($113.5 million) in stark contrast to net income of SEK 1.6 billion recorded a year ago. A steep decline in revenues over the past few quarters made things worse for Ericsson.
Inside the Headlines
Net sales for the quarter fell 8% year over year to SEK 49.9 billion ($5.7 billion). The top line also missed the Zacks Consensus Estimate of $5.8 billion. Weak mobile broadband market, declining network sales and lower investments in parts of Europe, Latin America and the Middle East & Africa dragged down revenues.
The decline in sales was all-pervasive, with all three operating segments of the company charting decline in revenues. Lower IPR licensing revenues, in particular, were a major drag on second-quarter sales.
Ericsson Price, Consensus and EPS Surprise
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