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Ericsson (ERIC) Beats Earnings & Revenue Estimates in Q4

Zacks Equity Research
·4 min read

Ericsson ERIC reported impressive fourth-quarter 2021 results, wherein both the bottom and the top lines beat the Zacks Consensus Estimate.

The Sweden-based telecom gear maker continues to expand its footprint, despite challenges in China, by leveraging its competitive 5G portfolio.

Net Income

Net income in the quarter was SEK 10,076 million ($1,137.4 million) or SEK 3.02 (36 cents) per share compared with SEK 7,522 million or SEK 2.26 per share in the prior-year quarter. The improvement was driven by lower tax and improved EBIT. The bottom line beat the Zacks Consensus Estimate by 11 cents.

In 2021, net income was SEK 22,694 million or SEK 6.81 per share compared with SEK 17,483 million or SEK 5.26 per share in 2020.

Revenues

Quarterly reported net sales increased 2.5% year over year to SEK 71,332 million ($8,056 million). Organic sales (adjusted for comparable units and currency) grew 2%, primarily driven by 5G deployments in North America, Europe and Latin America as well as by growth in Digital Services in the Middle East and Africa. The top line beat the consensus estimate of $7,719 million.

In 2021, reported net sales were almost stable year over year at SEK 232,314 million.

Quarterly Segment Results

Sales in Networks (which accounts for the lion’s share of total sales) increased 3.4% year over year to SEK 51.1 billion, driven mainly by product sales with a lower share of services in the sales mix. Organic sales grew 3%, with double-digit growth in North America, Europe and Latin America. The same declined SEK 1.5 billion year over year in China. The segment’s gross margin improved to 46.3% from 43.4%, mainly due to operational leverage.

Digital Services’ sales were almost stable year over year at SEK 12.7 billion, reflecting growth in the Middle East and Africa and South East Asia, Oceania and India. Sales in China decreased SEK 0.4 billion year over year. The segment’s gross margin improved to 42.8% from 40.9%, supported by a higher share of software sales.

Managed Services’ sales fell 6.9% year over year to SEK 5.4 billion, mainly due to lower demand under certain contracts and contract rescoping. The segment’s gross margin increased to 18.2% from 17.7%, primarily driven by efficiency gains. Ericsson’s investments in automation, analytics, and AI-driven offerings are supporting 5G and efficiency in service delivery.

Sales in Emerging Business and Other jumped 23.5% year over year to SEK 2.1 billion, driven by the acquired Cradlepoint business and iconectiv. The segment’s gross margin declined to 34.9% from 35.3%.

Other Quarterly Details

Gross margin increased to 43.2% year over year from 40.6%, driven by margin improvements in all segments (except Emerging Business and Other). Total operating expenses were SEK 19.4 billion compared with SEK 17.6 billion in the prior-year quarter. EBIT was SEK 11.9 billion compared with SEK 11 billion in the year-ago quarter on improved gross income in Networks.

Cash Flow & Liquidity

In 2021, Ericsson generated SEK 39,065 million of cash from operating activities compared with SEK 28,933 million in 2020.

As of Dec 31, 2021, the company had SEK 54,050 million ($5,972.1 million) in cash and cash equivalents with SEK 22,241 million ($2,457.5 million) of non-current borrowings.

Zacks Rank & Stocks to Consider

Ericsson currently has a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Vocera Communications, Inc. VCRA is a better-ranked stock in the broader Zacks Computer and Technology sector that sports a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has been revised 6.2% upward over the past 60 days.

Vocera Communications delivered a trailing four-quarter earnings surprise of 109.6%, on average. The stock has returned 76.3% in the past year.

SeaChange International, Inc. SEAC carries a Zacks Rank #2 (Buy). The consensus estimate for current-year earnings has been revised 10% upward over the past 60 days.

SeaChange International delivered a trailing four-quarter earnings surprise of 37.2%, on average. The stock has inched up 6.8% in the past year.

Qualcomm, Inc. QCOM, carrying a Zacks Rank #2, is another solid pick for investors. The consensus estimate for current-year earnings has been revised 0.7% upward over the past 60 days.

Qualcomm delivered a trailing four-quarter earnings surprise of 11.2%, on average. It has appreciated 4.6% in the past year.

Conversion rate used:

SEK 1 = $0.112879 (period average from Oct 1, 2021 to Dec 31, 2021)

SEK 1 = $0.110492 (as of Dec 31, 2021)


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