Nokia Corporation (NOK) displayed strong sales growth in the final quarter of 2014. In Apr 2014, the company sold its struggling mobile phone business to Microsoft Corp. (MSFT). Post-divestiture, Nokia’s Network division has become its core growth area.
In the final quarter of the year, the company reported earnings of €0.09 (approximately 11 cents), marginally short of the Zacks Consensus Estimate of 12 cents. Quarterly earnings displayed double-digit growth on a year-over-year basis.
Revenues grew 9% year over year to €3.8 billion (approximately $4.7 billion), surpassing the Zacks Consensus Estimate of $4.5 billion. Strong sales in the North American market boosted revenues. Growth was witnessed across all the three divisions of the company.
Quarterly adjusted gross margin was 43.5% in fourth-quarter 2014 compared with 42.5% in the prior-year period. Operating margin improved to 13.8% from 11.8% in the fourth quarter of 2013. Nokia exited the reported quarter with cash flow from operating activities of €224 million ($2,797 million), up a substantial 323%.
Nokia Networks Segment
Total revenue was approximately €3.4 billion (approximately $4.2 billion), up 8% year over year. Strong sales in the North American market boosted revenues. Quarterly adjusted operating margin climbed 280 basis points to 14% in the final quarter of the year.
HERE Segment
Quarterly total revenue was €292 million (approximately $365 million), up 15% year over year. The revenue growth was attributable to a strong automotive market. Adjusted operating margin in the reported quarter declined 300 basis points to 6.8%.
Nokia Technologies Segment
Quarterly total revenue came in at €149 million (approximately $186 million), up 23% year over year. Adjusted operating margin in the reported quarter declined 1520 basis points to 51.7%, due to higher expenses.
Annual Results
In full-year 2014, adjusted earnings grew 40% to approximately 37 cents. Revenues for 2014 were flat at approximately $16.9 billion. This compared favorably with the Zacks Consensus Estimate numbers for 2014 which hinted at earnings of 34 cents on revenues of $15.9 billion.
Dividend
The company’s board of directors will propose a dividend of approximately 19 cents per share for 2014. Shares of the company declined in pre-market trading as the magnitude of the dividend didn’t seem to please investors.
Outlook for 2015
For 2015, adjusted operating margin for the Nokia Networks segment is projected in the range of 8% to 11%. Adjusted operating margin for the HERE segment is now projected in the range of 7% to 12% (old guidance: 5% to 10%). Adjusted operating expenses at the Nokia Technologies Segment are expected to rise significantly in 2015 over 2014 levels.
Net sales at all the three divisions are projected to increase in 2015 on a year-over-year basis. Management still anticipates capital expenditure of €250 million (for the company as a whole) for 2015.
Zacks Rank
Currently, Nokia has a Zacks Rank #2 (Buy). Some other well-ranked stocks are InterDigital, Inc. (IDCC) and Belden Inc. (BDC). Both stocks carry a Zacks Rank #1 (Strong Buy).
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