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Nomura Analysts Noted That The “Surprisingly Strong Revenue Turnaround” Of Nokia Seems To Improve The Margins

Nokia Corporation (ADR) (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) showed a  turnaround sustainability with its solid financial results for the third quarter driven by the excellent performance of its Networks business.

Nokia X2

Nokia continued to beat estimates

In a note to investors, Nomura Global Markets Research analysts Stuart Jeffrey and Woo Jin Hoo noted that Nokia Corporation (ADR) (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) continued to beat the expectations of Wall Street analysts after reporting excellent 3Q results.

Nokia Networks posts surprising revenue growth

The sales performance of its Networks business was 11% higher than expectations while its operating margins were 2% above estimates. According to Jeffrey and Hoo, Nokia Corporation (ADR) (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) seemed to have increased the likelihood of sustaining high margins.

During the third quarter, Nokia Networks posted 13% revenue growth year-over-year or 15% growth quarter-over-quarter. Jeffrey and Hoo described it as “surprisingly strong revenue turnaround,” that seems to improve the sustainability of margins.

According to Jeffrey and Hoo, the progress of the Networks business of Nokia Corporation (ADR) (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) “highlights sustainability of turnaround.”

Jeffrey and Hoo said they raised their valuation for Nokia Networks is in line with Ericsson (ADR) (NASDAQ:ERIC). The analysts estimated that the company’s market share increased 4pp qoq in the third quarter. However, they expected a limited upside on the company’s stock.

“Networks accounts for just 50% of fair value and is now at industry-leader multiples, seemingly limiting the scope for much upside. The rest of Nokia’s valuation consists of items with limited valuation volatility (cash, deferred tax assets and mapping) or where any changes in valuation are likely binary and still some way from resolution (patent licensing),” according to Jeffrey and Hoo.

The analysts maintained a Neutral rating for Nokia Corporation (ADR) (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) with a target price of €6.79 or $8.55 per share.

Nokia remains a mixed bag

On the other hand, analysts at Bernstein Research emphasized that Nokia Corporation (ADR) (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) remained a mixed bag with a truly successful Networks business and standstill HERE maps and Technologies businesses.

Bernstein Research analysts Pierre Ferragu and his colleagues noted that the Nokia Systems and Networks business continues to outperform, but HERE made no profits. Nokia Technologies delivered lower than expected operating profits for the third quarter.

Ferragu and his fellow analysts said the shares of Nokia Corporation (ADR) (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V ) remain “un-actionable” and they not perceive catalysts over the near-term.

“Today’s margins and near-term expectations are the higher end of the range, which makes the stock unattractive for now,” according to the analysts. They have a Market perform rating for Nokia Corporation (ADR) (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V ). They raised their price target to €5.50 per share to reflect a potential deal with Alcatel Lucent SA (ADR) NYSE:ALU).

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