Nokia stock climbs as cost cuts limit damage from 23% drop in sales

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By Blegug Nan

Nokia stock climbs as cost cuts limit damage from 23% drop in sales

Nokia shares rallied on Thursday as the telecom equipment maker reported better-than-expected margins despite sales missing estimates.

Nokia stock NOKIA, +7.94% NOK, +1.49% in Helsinki jumped 7% as the company reported a loss of €33 million on a 23% decline in revenue to €5.71 billion. On a comparable basis, Nokia said it would have earned €568 million, a decline of 39%. Analysts polled by Visible Alpha expected an adjusted profit of €659 million on sales of €6.27 billion.

Like Ericsson, Nokia said economic uncertainty was pressuring operator spending, though it said there were signs of “green shoots.”

But investors were impressed with its gross margin, which fell just 0.4 percentage points to 43.1% on a comparable basis. Nokia said improvements in mobile networks and cloud and network services helped to offset a decline from its technologies division.

“Despite the revenue miss, cost control and mix shift to more software meant that gross margin beat by 264bps,” said Sandeep Deshpande, an analyst at JPMorgan.

Nokia also announced a new €600 million stock buyback program, over two years, and guided to a comparable operating profit between €2.3 billion and €2.9 billion, which is in line with analyst estimates.

Andrew Gardiner, an analyst at Citi, kept a sell rating on the company and a target of €2.7. “Nokia is doing the right things in terms of further cost cuts, but is now fighting back from an even deeper hole than anticipated in December,” he said.

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