Elisa Oyj :ELMUF-US: Earnings Analysis: Q3, 2016 By the Numbers : December 22, 2016

Elisa Oyj reports financial results for the quarter ended September 30, 2016.

We analyze the earnings along side the following peers of Elisa Oyj – Shenandoah Telecommunications Company (SHEN-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 467.31 million, Net Earnings of USD 84.04 million.
  • Gross margins widened from 32.29% to 33.60% compared to the same period last year, operating (EBITDA) margins now 36.37% from 36.45%.
  • Year-on-year change in operating cash flow of -18.36% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings growth from operating margin improvements as well as one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2016-09-30 2016-06-30 2016-03-31 2015-12-31 2015-09-30
Relevant Numbers (Quarterly)
Revenues (mil) 467.31 443.75 429.98 442.51 438.49
Revenue Growth (%YOY) 6.57 2.86 0.47 -8.13 -13.76
Earnings (mil) 84.04 67.86 69.35 61.07 75.8
Earnings Growth (%YOY) 10.87 1.56 4.91 -1.82 -16.47
Net Margin (%) 17.98 15.29 16.13 13.8 17.29
EPS 0.52 0.43 0.43 0.38 0.48
Return on Equity (%) 34.6 30.4 29.61 24.88 32.97
Return on Assets (%) 13.17 10.67 11.05 9.82 12

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Market Share Versus Profits

Revenues History
Earnings History

ELMUF-US‘s change in revenue this period compared to the same period last year of 6.57% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that ELMUF-US is holding onto its market share. Also, for comparison purposes, revenues changed by 5.31% and earnings by 23.84% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s earnings growth has been influenced by the year-on-year improvement in gross margins from 32.29% to 33.60%. However the company’s overhead costs have prevented it from fully capitalizing on these gross margin improvements. In fact, the company’s operating margins (EBITDA margins) showed no improvement over the same period last year.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Cash Versus Earnings – Sustainable Performance?

ELMUF-US‘s change in operating cash flow of -18.36% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings

Margins

The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating (EBIT) margins from 22.51% to 23.12% and (2) one-time items. The company’s pretax margins are now 22.26% compared to 21.04% for the same period last year.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

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Company Profile

Elisa Oyj engages in the business of telecommunications. It provides information and communications, and online services in Finland. It operates through the Consumer Customers, and Corporate Customers segments. The Consumer Customers segment provides consumers and households with telecommunications services, such as voice and data services. The Corporate Customers segment offers to the corporate and community customers voices and data services, information and communication solutions, and contact center services. The company was founded by Daniel Johannes Wadén in 1882 and is headquartered in Helsinki, Finland.

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