Ericsson Q1 Profit Surges, Sees Sales To Stabilize In H2; Stock Climbs

(RTTNews) - Shares of LM Ericsson were gaining more than 6 percent in the morning trading in Stockholm as well as around 8 percent in pre-market activity on the Nasdaq after the Swedish telecom major reported Tuesday significantly higher profit in its first quarter. Meanwhile, net sales were weak hit mainly by lower Networks sales.

Further, the company said it expects sales to stabilize during the second half of the year, benefiting from recent contract wins and the normalization of customer inventory levels in North America.

Borje Ekholm, President and CEO, said, "We expect a further decline in the RAN market, at least through the end of this year, as customers remain cautious with their investments and the pace of investment in India continues to normalize. … Our enterprise strategy aims to leverage network capabilities to increase telecoms industry revenue growth above the level that traffic growth alone could deliver.... While near-term dynamics are challenging, we remain fully committed to our long-term targets..."

In the second quarter, the company expects Networks gross margin excluding restructuring charges to be in the range of 42 percent to 44 percent. In the second half, margins should benefit from improved business mix.

For 2024, restructuring charges are expected to be in the range of 3.0 billion Swedish kronor to 4.0 billion Swedish kronor.

For the first quarter, net income attributable to owners of the parent company climbed to 2.56 billion kronor from 1.52 billion kronor last year. Earnings per share grew 71 percent to 0.77 krona from prior year's 0.45 krona.

The latest quarter results included a one-time gain of 1.9 billion kronor from the resolution of a commercial dispute.

EBIT was 4.1 billion kronor, up 35 percent from last year. EBIT margin improved to 7.7 percent from prior year's 4.9 percent. EBIT, excluding restructuring charges, increased to 4.3 billion kronor from 4.0 billion kronor in the prior year.

EBITA, a key earnings metric, was 4.9 billion kronor, a growth of 27 percent. EBITA margin also improved to 9.2 percent from 6.2 percent last year.

EBITA excluding restructuring charges amounted to 5.1 billion kronor, higher than prior year's 4.8 billion kronor, with a margin of 9.6 percent, up from 7.7 percent last year.

Quarterly net sales, meanwhile, decreased about 15 percent to 53.33 billion kronor from 62.55 billion kronor in the prior year. Sales adjusted for comparable units and currency fell 14 percent, reflecting reduced operator investment levels across a number of geographies.

Networks sales declined 19 percent organically as customers continued to be cautious with their investments.

In pre-market activity on the Nasdaq, Ericsson shares were gaining around 7.93 percent to trade at $5.17.

In Stockholm, Ericsson shares were trading at 56.96 kronor, up 6.3 percent.

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