Shares of Finland-based Nokia Corporation (NOK) have declined in excess of 7% despite issuing improved 2015 and long-term targets at its Capital Markets Day late last week.
While announcing its business outlook for 2015, the telecommunications equipment company stated that it expects sales at its Nokia Networks division to grow over the 2014 levels. Note that the bulk of the company’s revenues are derived from this segment. Segmental operating margin on an adjusted basis is projected in the range of 8% to 11%.
Nokia also forecasts 2015 sales at its HERE and Nokia Technologies segments to expand over the 2014 levels. The 2015 operating margin on an adjusted basis at the HERE division is expected in the band of 5% to 10%.
We remind investors, that in Apr 2014, the company sold its struggling mobile phone business to Microsoft Corporation (MSFT). Following the divestiture, Nokia’s Network division now comprises its core growth area. The Network division is strongly poised for significant growth in sales, going forward, with its 4G LTE networks widely expanding in North America and China.
Additionally, the company expects long-term net sales at the Nokia Networks' division to grow at a slightly faster pace than the broader market. The company now expects the segment’s adjusted operating margin to vary in the range of 8% to 11% (old guidance: 5% to 10%) over the long term. However, the outlook failed to please the investors who were probably looking for a more promising projection. This explains the downside in the shares’ momentum.
We remind investors that while announcing its third quarter financial results last month, Nokia had stated that it expects 2014 adjusted operating margin for the Nokia Networks segment to be slightly above 11%. Moreover, it hopes to generate EUR 600 million from the Nokia Technologies Segment in the year. Management also anticipates capital expenditure of EUR 250 million for 2014.
Zacks Rank
Nokia currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the wireless equipment industry include ViaSat Inc. (VSAT) and InterDigital, Inc. (IDCC). Both the stocks sport a Zacks Rank #1 (Strong Buy).
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