Nokia Oyj :NOK-US: Earnings Analysis: Q3, 2017 By the Numbers : October 30, 2017

Nokia Oyj reports financial results for the quarter ended September 30, 2017.

We analyze the earnings along side the following peers of Nokia Oyj – LM Ericsson Telefon AB Sponsored ADR Class B, BlackBerry Limited,, Inc. and Microsoft Corporation (ERIC-US, BB-US, AMZN-US and MSFT-US) that have also reported for this period.


  • Summary numbers: Revenues of USD 6,508.54 million, Net Earnings of USD -227.21 million.
  • Gross margins widened from 33.57% to 39.73% compared to the same period last year, operating (EBITDA) margins now 9.33% from 9.07%.
  • Year-on-year change in operating cash flow of -417.85% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Narrowing of operating margins contributed to decline in earnings.

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

2017-09-30 2017-06-30 2017-03-31 2016-12-31 2016-09-30
Relevant Numbers (Quarterly)
Revenues (mil) 6508.54 6282.04 5759.57 7109.72 6588.55
Revenue Growth (%YOY) -1.21 0.18 -5.02 82.01 94.83
Earnings (mil) -227.21 -472.91 -506.56 705.51 -133.11
Earnings Growth (%YOY) -70.69 36.87 13 30.89 -163.57
Net Margin (%) -3.49 -7.53 -8.8 9.92 -2.02
EPS -0.04 -0.09 -0.1 0.12 -0.02
Return on Equity (%) -1.13 -2.24 -2.31 3.21 -0.6
Return on Assets (%) -1.88 -3.93 -4.18 5.76 -1.07

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Market Share Versus Profits

Revenues History
Earnings History

NOK-US’s change in revenue this period compared to the same period last year of -1.21% 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 NOK-US is holding onto its market share. Also, for comparison purposes, revenues changed by 3.61% and earnings by 51.96% 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 year-on-year earnings decline did not come as a result of a contraction in gross margins or because of any cost control issues. Both gross margins and operating margins (EBITDA) margins actually improved over this time frame. Gross margins went from 33.57% to 39.73%, while operating margins improved from 9.07% to 9.33% over this period. For comparison, gross margins were 39.79% and EBITDA margins 9.33% in the immediate last period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

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

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

NOK-US’s improvement in gross margin has been accompanied by an improvement in its balance sheet as well. This suggests that gross margin improvements are likely from operating decisions and not accounting gimmicks. Its working capital days are now 112.90 days compared to 125.48 days for the same period last year.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

NOK-US’s change in operating cash flow of -417.85% 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


The company’s decline in earnings has been influenced by the following factors: (1) Decline in operating margins (EBIT margins) from 2.70% to 2.05% and (2) one-time items that contributed to a decrease in pretax margins from -0.42% to -5.33%

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

Nokia Oyj provides network infrastructure, technology and software services. It operates through the following segments: Ultra Broadband Networks, IP Networks & Applications and Nokia Technologies. The Ultra Broadband Networks segment comprises mobile networks and fixed networks. The IP Networks and Applications segment comprising IP/Optical networks and applications & analytics. The Nokia Technologies segment focuses on advanced technology development and licensing. The company was founded in 1865 and is headquartered in Espoo, Finland.

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