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    ERIC B   SE0000108656

TELEFONAKTIEBOLAGET LM ERICSSON (PUBL)

(ERIC B)
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Ericsson's Q3 earnings shine as margins rise, 5G rolls out in China

10/21/2020 | 01:11am EDT

* 5G roll out in China a big driver this quarter - CFO

* Gross margin rises to 43.2% from 37.8%

* Expects profits from China to improve further (Adds comments from CFO interview, details)

STOCKHOLM, Oct 21 (Reuters) - Sweden's Ericsson on Wednesday reported quarterly core earnings that beat market estimates, helped by higher margins and China's 5G rollout, and said it was "more confident" in meeting its 2020 targets.

Ericsson's 5G contract wins have touched 112 as more telecom operators are building next-generation networks and as diplomatic pressure from the United States is pushing out market leader Huawei from more countries.

Third-quarter adjusted operating earnings rose to 9.0 billion Swedish crowns ($1.0 billion) from 6.5 billion a year ago, beating the mean forecast of 6.98 billion crowns, according to Refinitiv estimates.

Total revenue rose 1% to 57.5 billion crowns.

"While the pandemic has hurt revenues for several of our customers, and in some cases this has led to a reduction of capex, we have not seen any negative impact on our business, largely due to footprint gains," Chief Executive Borje Ekholm said in a statement.

The group's gross margin, excluding restructuring charges, rose to 43.2% in the third quarter from 37.8% in the year-ago period.

"The 5G roll out in China was the big driver in this quarter," Ericsson CFO Carl Mellander told Reuters.

Ericsson said contracts in China have developed according to plan, contributing to profits in the third quarter and are expected to improve further.

Unlike its Nordic rival Nokia, Sweden-based Ericsson has won contracts from all three major operators in China to supply radio equipment for 5G networks.

However, a decision by the Swedish government to block China's Huawei and ZTE from domestic 5G networks may lead to a catch-22 situation for Ericsson. While it may win some more share in Sweden's network infrastructure, the risk of a retaliation by China looms large.

"We don't comment on different countries' decisions but in general we believe in free competition," Mellander said.

China's telecom regulator issued a notice on Tuesday calling for strengthening of supervision of foreign-invested telecom companies in the country.

Separately, Ericsson announced on Wednesday a five-year, multi-billion crowns deal with Telia to upgrade its 4G networks across Sweden and Estonia. ($1 = 8.7165 Swedish crowns) (Reporting by Supantha Mukherjee and Helena Soderpalm; editing by Niklas Pollard and Kim Coghill)


ę Reuters 2020
Stocks mentioned in the article
ChangeLast1st jan.
ERICSSON AB 1.44% 109.64 Delayed Quote.10.73%
NOKIA OYJ -0.23% 4.3335 Delayed Quote.37.96%
TELIA COMPANY AB 0.30% 37.14 Delayed Quote.9.05%
ZTE CORPORATION 4.12% 34.15 End-of-day quote.1.49%
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Financials
Sales 2021 240 B 27 876 M 27 876 M
Net income 2021 18 673 M 2 172 M 2 172 M
Net cash 2021 28 373 M 3 301 M 3 301 M
P/E ratio 2021 19,4x
Yield 2021 1,95%
Capitalization 359 B 41 618 M 41 809 M
EV / Sales 2021 1,38x
EV / Sales 2022 1,26x
Nbr of Employees 101 113
Free-Float 89,4%
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Technical analysis trends TELEFONAKTIEBOLAGET LM ERICSSON (PUBL)
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Income Statement Evolution
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Mean consensus OUTPERFORM
Number of Analysts 24
Average target price 131,14 SEK
Last Close Price 108,12 SEK
Spread / Highest target 43,4%
Spread / Average Target 21,3%
Spread / Lowest Target -12,1%
EPS Revisions
Managers and Directors
NameTitle
Erik B÷rje Ekholm President, Chief Executive Officer & Director
Carl Mellander CFO, Senior VP & Head-Group Function Finance
Ronnie Leten Chairman
Erik Ekudden Chief Technology Officer & Senior Vice President
Xavier Dedullen Secretary, Chief Legal Officer & Senior VP
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