Ericsson Earnings Miss Estimates As Costs Dent Margins

Reuters2022-10-20

Swedish telecom equipment maker Ericsson on Thursday reported third-quarter core earnings that missed expectations for the second quarter in a row, as margins took a hit from higher component and logistics costs.

The company's quarterly adjusted operating earnings fell to 7.1 billion Swedish crowns ($633.05 million) from 8.8 billion crowns a year earlier, missing analysts' mean forecast of 8.73 billion, according to Refinitiv data.

Ericsson's quarterly revenue, however, rose to 68 billion crowns from 56.3 billion a year earlier, beating analysts' average estimate of 66.25 billion.

Gross margin fell to 41.4% from 44.0% as it was also hit by lower royalty revenue due to ongoing patent disputes.

Footprint gains with large-scale projects in early stages tend to have a dilutive impact on gross margins, Chief Executive Borje Ekholm said in a statement.

Apart from supply chain disruptions due to the Russia-Ukraine war and chip shortages, the company has been facing investigations over bribery in Iraq and investor ire over improper disclosure.

The company is being investigated by the U.S. Department of Justice (DOJ) and Securities and Exchange Commission $(SEC.UK)$ over its past conduct in Iraq. It had said it was engaging with both agencies and the outcome could not be assessed yet.

($1 = 11.2155 Swedish crowns)

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