(Bloomberg) -- Nokia Oyj's third-quarter results disappointed analysts who saw signs that competitors Ericsson AB and Huawei Technologies Co. are ahead in the race to win share of the 5G equipment market. Liberum fretted that Nokia continues to face “execution challenges.”
A cut to the Finnish company's outlook and the suspension of its dividend overshadowed numbers that met expectations, prompting the deepest slump in the stock since 1991. Ericsson's shares declined 4.1% in sympathy, though the Swedish firm has enjoyed a recent boost after lifting its sales target for 2020 last week.
READ MORE: Nokia Tanks After Cutting Outlook, Sacrificing Payout for 5G
Here's what analysts are saying about Nokia's results and outlook cut:
LIBERUM (Janardan Menon)
- Nokia's results were “disappointing,” as while sales were in-line, gross margin disappointed and operating income was below Liberum's estimate
- Flags Nokia dropped operating margin targets for both 2019 and 2020, and paused dividend payments
- “While it is positive that Nokia is now providing much lower targets for FY19 and FY20, we believe the company continues to face execution challenges and a challenging competitive environment”
- Has a hold rating on Nokia, PT EU4.90
MIRABAUD (Neil Campling)
- Ericsson is leading at the moment, with higher number of 5G wins, earlier focus on network margin sustainability, while Nokia had higher exposure to capex pause at ongoing T-Mobile/Sprint delay
- Nokia halting dividend to invest in 5G is the “right move,” though should have been done before and communicated to market better
- Ericsson better positioned, likely taking share and becoming de-facto preferred vendor in Western markets
- “While you can't bottom fish Nokia, we would add to Ericsson (already reported) on sentiment weakness today:” Mirabaud
CITI (Amit Harchandani)
- A “good” 3Q is overshadowed by co. “materially” lowering its 2019 and 2020 outlook and suspending dividend
- Mid-point of new adjusted operating margin guidance implies a potential cut of ~25% to consensus 2020 adjusted operating profit estimates
- Citi has a neutral rating on Nokia, PT EU5.00
HANDELSBANKEN (Daniel Djurberg)
- Nokia has made a “hefty” cut to its full-year outlook
- Despite “solid” 3Q, following 2019 and 2020 profit warning, expects on a preliminary basis consensus to cut back 2019 non-IFRS EPS with 7% to 9% estimates, while as much as -25% to -35% for 2020 and 2021
- Handelsbanken has a buy rating on Nokia, PT EU5.60
--With assistance from James Cone and Jonas Cho Walsgard.
To contact the reporters on this story: Kit Rees in London at krees1@bloomberg.net;Kati Pohjanpalo in Helsinki at kpohjanpalo@bloomberg.net
To contact the editors responsible for this story: Celeste Perri at cperri@bloomberg.net, John Viljoen, Jon Menon
©2019 Bloomberg L.P.
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