What To Expect As Ericsson Reports Q1 Results
Ericsson (NASDAQ:ERIC) is expected to publish its Q1 2018 results on April 20, reporting on what is likely to be another mixed quarter for the company. Over Q4 2017, sales of the company’s bread-and-butter Networking division declined by about 14% year-over-year in local currency terms, and that trend may continue in Q1, although the magnitude of the declines could be lower. Below, we take a look at what to expect when the company reports earnings.
We have created an interactive dashboard analysis which outlines our expectations for Ericsson over 2018. You can modify the key drivers to arrive at your own price estimate for the company.
The Radio Access Network market has been shrinking over the last few years, as carriers have been winding down the deployment of 4G networks. Moreover, companies such as Ericsson have also had to contend with mounting competition from Chinese players such as Huawei and ZTE. Ericsson has indicated that the Radio Access Network market could contract by around 2% in 2018. However, there are some near-term positives for the market. For instance, major U.S. carriers are expected to begin initial commercial deployments of 5G solutions this year, and there is a possibility that the recent tax reforms in the U.S. and the buildout of the new wireless network for first responders in the country could drive spending on RAN equipment over the year.
- Down 16% This Year Amid A Weak Demand In The U.S., What Lies Ahead For Ericsson Stock?
- Is Ericsson Stock A Buy Despite Lull In North America?
- Is Ericsson Stock Good Value At $6?
- Can Ericsson Recover From Its 9.2% Drop Over The Past Two Weeks?
- Forecast Of The Day: Ericsson Managed Services Revenue
- Ericsson Stock Looks Unlikely To Sustain Its Earnings Driven Outperformance
With market conditions likely to remain relatively mixed, Ericsson is focusing on bolstering its profitability. For instance, Ericsson has been looking to scale up sales of higher value offerings such as its Ericsson Radio System, which is an end-to-end radio modular and scalable network portfolio. The product accounted for ~71% of deliveries in Q4’17, up from just around 15% in Q4’16. The company has also been seeing a higher mix of software sales in its revenue mix. During the fourth quarter, gross margins for the Networking division grew by around 430 bps year-over-year to 35.9%. Margins could also improve in the Managed Services segment, as Ericsson has been identifying contracts to be exited, renegotiated or transformed, as it looks to improve profitability.
What’s behind Trefis? See How it’s Powering New Collaboration and What-Ifs
For CFOs and Finance Teams | Product, R&D, and Marketing Teams
More Trefis Research
Like our charts? Explore example interactive dashboards and create your own