Nokia Delivers Strong EPS Growth in Q4

Nokia (NYSE:NOK), a leading telecommunications and network infrastructure provider, announced its fourth-quarter 2024 results on Jan. 30. Earnings per share (EPS) for the quarter came in at 0.18 euros, which surpassed analyst forecasts of 0.14 euros by a notable margin. However, revenue fell slightly short of expectations, reaching 5.983 billion euros against an expected 6.006 billion euros. The quarter as a whole presented a robust performance in profitability despite revenue challenges in specific segments.

Source: Analysts' estimates for the quarter provided by FactSet.

Business Overview

Nokia is a major player in the global telecommunications and technology sectors. It provides comprehensive solutions for network infrastructure, mobile networks, cloud and network services, and other technologies. The 5G transition has played a critical role in its growth trajectory. It has an extensive portfolio in internet protocol networks, fixed networks, and optical networks.

Its key success factors have included its strong intellectual property portfolio, which has been supported by new licensing agreements, and its strategic expansion in cloud and network services.

Quarter Highlights

In the fourth quarter, Nokia's network infrastructure segment emerged as a top performer, with 17% growth in constant-currency terms. This was largely driven by new deals in internet protocol and optical networks, particularly in North America, demonstrating a recovery in demand. The Nokia Technologies segment also experienced a remarkable 85% increase in its net sales, largely due to new licensing agreements, supporting the company's strategy to leverage its intellectual property.

The mobile networks unit faced challenges. Sales declined by 1% year over year, mainly due to reduced activities in India and North America. Nonetheless, gross margins showed resilience as the company maintained commercial and pricing discipline despite market weaknesses. Cloud and network services returned to growth, with a 7% increase, bolstered by strategic R&D focus on its Network as Code platform, highlighting Nokia's commitment to automation and technological advancement.

Significant progress was also made in strategic initiatives, such as increasing involvement in the ongoing 5G transition and expanding cloud-based offerings. Notably, negotiations and new agreements with Samsung and HP have fortified Nokia's intellectual property monetization strategy.

However, challenges remain. Nokia’s dependency on macroeconomic conditions, coupled with the pressure of increased receivables and restructuring costs, necessitates continuous prudent management and strategy adjustments.

Looking Ahead

For 2025, Nokia's management is forecasting a comparable operating profit ranging from 1.9 billion euros to 2.4 billion euros, with free cash flow conversion rates between 50% and 80%. These figures reflect optimism for sustained profitability. The company intends to continue investing in 5G advancements, and expanding its presence in data centers and network API opportunities.

Investors should focus on Nokia's agile response to market dynamics amid its expansion. Attention should be given to the ongoing pressure from macroeconomic factors and dependencies that could affect its growth trajectories in both mobile networks and optical networks.

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