STOCKHOLM--Sweden's Ericsson is due to report third-quarter earnings on Thursday. Here is what to know:
NET PROFIT: The telecom-equipment maker is expected to post a net profit of 5.09 billion Swedish kronor ($510.8 million), according to a consensus provided by FactSet, compared with 11.15 billion kronor in the same period a year prior. Earnings last year were boosted by the sale of connectivity services business Iconectiv, which generated a 7.6 billion kronor capital gain.
SALES: A FactSet forecast expects sales to fall 1.7% to 55.28 billion kronor from 56.24 billion kronor a year earlier.
The stock is up around 6.5% over the last 12 months and trades at 96.46 kronor on Wednesday.
WHAT TO WATCH:
--J.P.Morgan says that with wireless infrastructure growth likely to remain slow until the 6G transition, the focus of Ericsson's results will remain on cost optimization and whether that can improve margins from current levels.
--The market focus has shifted to investing in infrastructure associated with the artificial-intelligence data-center boom, so the overall wireless infrastructure market is likely to be weak in the U.S. Markets outside the U.S. are likely to do better though, J.P.Morgan says.
--The key focus will be on the company's guidance for the fourth quarter, especially on the networks gross margin, according to analysts at Jefferies. "We model the networks gross margin in Q4 to further decline to 48% due to a combination of continuing networks roll-out and the impact of rising component costs, especially memory."
--Ericsson has guided to a third-quarter networks adjusted gross margin of 48%-50%.
--Jefferies expects third-quarter networks sales to grow 5% on quarter after Ericsson guided to growth being stronger than normal seasonality of 1%. The bank also forecasts cloud software and services revenue to grow at 4% on quarter, as per the company's guidance of growth being in-line with average seasonality.
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