Nokia (NOK) Tops Q3 EPS by EUR0.03, Offers Outlook
Nokia (NYSE: NOK) reported Q3 EPS of EUR0.09, EUR0.03 better than the analyst estimate of EUR0.06. Revenue for the quarter came in at EUR5.54 billion versus the consensus estimate of EUR5.64 billion.
OUTLOOK
| Metric | Guidance | Commentary | |
| Nokia | Annual cost savings for Nokia, excluding Nokia Technologies | Approximately EUR 1.2 billion of total annual cost savings to be achieved in full year 20181 | Compared to the combined non-IFRS operating costs of Nokia and Alcatel-Lucent for full year 2015, excluding Nokia Technologies. Nokia expects approximately EUR 800 million of the cost savings to come from operating expenses and approximately EUR 400 million from cost of sales. Restructuring and associated charges are expected to total approximately EUR 1.9 billion. Restructuring and associated cash outflows are expected to total approximately EUR 2.25 billion.(This is an update to earlier commentary for restructuring and associated charges to total approximately EUR 1.7 billion and restructuring and associated cash outflows to total approximately EUR 2.15 billion.) |
| Network equipment swaps | Approximately EUR 1.4 billion in total1 (update) | The charges related to network equipment swaps are being recorded as non-IFRS exclusions, and therefore do not affect Nokia's non-IFRS operating profit.(This is an update to earlier guidance for network equipment swaps to be approximately EUR 900 million total.) | |
| Non-IFRS financial income and expenses | Expense of approximately EUR 250 million in full year 2017 | Primarily includes net interest expenses related to interest-bearing liabilities and defined benefit pension and other post-employment benefit plans, as well as the impact of foreign exchange rate fluctuations on certain balance sheet items.Nokia expects cash outflows related to non-IFRS financial income and expenses to be approximately EUR 200 million in full year 2017. | |
| Non-IFRS tax rate | Approximately 20% for full year 2017 (update) | Nokia's non-IFRS tax rate in full year 2017 is expected to be influenced by factors including regional profit mix.(This is an update to earlier guidance and commentary for the non-IFRS tax rate to be between 25% to 30% for full year 2017.)Nokia expects cash outflows related to taxes to be approximately EUR 800 million for full year 2017. | |
| Capital expenditures | Approximately EUR 600 million in full year 2017 (update) | Primarily attributable to Nokia's Networks business.(This is an update to earlier guidance for capital expenditures to be approximately EUR 500 million for full year 2017.) | |
| Nokia's Networks business | Net sales | Decline in line with the primary addressable market in full year 2017 | We currently expect market conditions for full year 2017 to be slightly more challenging than earlier anticipated, and we are providing new commentary on our primary addressable market for full year 2018. Guidance for Nokia's Networks business in 2018 is planned to be provided in conjunction with Nokia's Report for Q4 and Full Year 2017.Nokia's outlook for net sales and operating margin for Nokia's Networks business are expected to be influenced by factors including: An approximately 4 to 5 percent decline in the primary addressable market for Nokia's Networks business in full year 2017, compared to the full year 2016, on a constant currency basis (This is an update to earlier commentary for a 3 to 5 percent decline.); An approximately 2 to 5 percent decline in the primary addressable market for Nokia's Networks business in full year 2018, compared to the full year 2017, on a constant currency basis (new commentary for our primary addressable market in full year 2018); Uncertainty related to the timing of completions and acceptances of certain projects, particularly in the second half of 2017 and first half of 2018 (new commentary for the first half of 2018); Robust competition in China, which is expected to adversely affect the fourth quarter 2017 in particular (new commentary); Uncertainty related to potential mergers or acquisitions by our customers (new commentary); Competitive industry dynamics; Product and regional mix; The timing of major network deployments; Execution of cost savings and reinvestment plans, with operating expenses down on a year-on-year basis in full year 2017; and The level of R&D investment needed to maintain product competitiveness and accelerate 5G. |
| Operating margin | 8-10% in full year 2017 | ||
| Nokia Technologies | Net sales | Not provided | Due to risks and uncertainties in determining the timing and value of significant licensing agreements, Nokia believes it is not appropriate to provide an annual outlook for full year 2017. For patent and brand licensing, Nokia is now disclosing net sales on a quarterly basis, rather than providing an annualized net sales run rate. In the third quarter 2017, Nokia announced plans to focus on patent, brand and technology licensing and target faster growth in digital health and accelerate growth in that market, while optimizing investments in virtual reality. Due to a reduced focus on digital media, Nokia no longer believes it is appropriate to provide an annual outlook for digital health and digital media for the full year 2017 (new commentary). (This is an update to earlier commentary for total net sales from digital health and digital media to grow year-on-year in full year 2017, primarily influenced by increased consumer adoption of our digital health and digital media products.) |
1For further details related to the cost savings and network equipment swaps guidance, please refer to the "Cost savings program" section above.
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