Will Nokia Corp. (NOK) Surprise Earnings This Season?

Nokia Corporation (NOK) is set to release fourth-quarter fiscal 2014 results before the opening bell on Jan 29.

Last quarter, the company delivered a positive 37.5% earnings surprise. Let’s see how things are shaping up for this announcement.

Factors at Play this Quarter

Substantial demand for 4GLTE network across China and the rest of the world coupled with increased spending on network restructuring in India, Korea and Indonesia may open up new avenues for the company. In line with this, Nokia has been winning network upgrade contracts on a regular basis. Moreover, the company’s HERE segment is well poised to gain from strong auto sales in the U.S.

However, the NSN segment continues to face stiff competition from network deployment players like Huawei and Ericssion. These companies command a superior position in the telecom infrastructure market with a high number of contract wins in China. Hence, to remain competitive, Nokia continues to incur high research expenses, which we believe will impact margins in the upcoming quarters.

Earnings Whispers

Our proven model does not conclusively show that Nokia is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen. Unfortunately, this is not the case here as elaborated below.

Zacks ESP: The Most Accurate estimate and the Zacks Consensus Estimate are poised at 12 cents. Hence, the ESP stands at 0.00%.

Zacks Rank: Nokia carries a Zacks Rank #2. While this increases the predictive power of ESP, we also need to have a positive ESP to be confident of an earnings surprise.

Meanwhile, we caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies you may want to consider as our model shows these have the right combination of elements to post an earnings beat this quarter.

American Tower Corporation (AMT) with an earnings ESP of +4.00% and a Zacks Rank #3.

Comcast Corp. (CMCSA) with an earnings ESP of +1.30% and a Zacks Rank #3.

Time Warner Cable Inc. (TWC) with an earnings ESP of +2.38% and a Zacks Rank #3.