ERIC Ericsson

By Dominic Chopping

STOCKHOLM--Sweden's Ericsson AB reported first-quarter earnings Wednesday. Here's what we watched:

NET PROFIT: The telecom-equipment maker reported a net profit attributable to shareholders of 2.16 billion Swedish kronor ($214.2 million), just shy of the SEK2.23 seen in a consensus provided by FactSet and down from SEK2.32 billion last year.

REVENUE: Sales rose 1.7% to SEK49.75 billion, driven by the company's key networks unit. Analysts polled by FactSet expected sales of SEK52.92 billion.

WHAT WE WATCHED:

--5G PROGRESS: Ericsson said it has experienced a limited impact from the coronavirus pandemic. The networks unit grew strongly in North America, Japan and Saudi Arabia during the quarter, while Latin America, India and North East Asia had sales declines. In China, Ericsson said it has grown market share, but it expressed concern over the delayed investment in the technology in Europe, saying it risks falling behind the rest of the world and urged governments to restart their economies by investing in 5G. In North America, the closing of the Sprint-T Mobile merger is expected to boost investments in the second half.

--MARGINS: In its key networks unit, the gross margin increased to 44.4% from 43.2%, after experiencing high activity across multiple regions. A favorable business mix more than compensated for an increased portion of strategic contracts and the expected negative effect from the acquired antenna and filter business. Group gross margin reached 39.8% from 38.4%.

--GUIDANCE: Ericsson said there is near-term uncertainty around sales volumes due to the coronavirus and the macroeconomic situation, but with current visibility it has no reason to change its financial targets for 2020 and 2022. Ericsson targets 2020 sales of between SEK230 billion and SEK240 billion with an operating margin excluding restructuring charges at over 10% of sales. The 2022 margin target is 12%-14%, excluding restructuring charges. It added that with uncertainties from the pandemic hitting short-term growth, it expects somewhat lower than normal sequential sales growth in the second quarter.

Write to Dominic Chopping at dominic.chopping@wsj.com

(END) Dow Jones Newswires

April 22, 2020 06:28 ET (10:28 GMT)

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