Ericsson Shares Surge On Significantly Higher Q3 Profit, Though Sales Down

(RTTNews) - Shares of LM Ericsson were gaining around 15 percent in Sweden as well as in the pre-market activity on the Nasdaq, after the Swedish telecom major reported Tuesday significantly higher profit in its third quarter, benefited by a capital gain from the divestment of iconectiv. Meanwhile, net sales declined on a reported and organic basis from the prior year.

Börje Ekholm, President and CEO, said, "In Q3, we established margins at a new long-term level following strong operational execution over the past few years.... Solid recurring cash flow and the iconectiv sale contributed to a strong Q3 cash position, offering scope for increased shareholder distributions. The Board's recommendation on the scale and mechanism for the distribution will be included in the Q4 report for decision at the AGM."

Looking ahead for the fourth quarter, the company expects Enterprise organic sales to stabilize and the RAN market to remain broadly stable.

Regarding segments, the company noted that increased uncertainty remains on the outlook, both in terms of potential for further tariff changes as well as in the broader macroeconomic environment.

The fourth-quarter sales growth, both in Networks segment and Cloud Software and Services segment, are expected to be broadly similar to 3-year average seasonality.

In the third quarter, net income surged 191 percent to 11.30 billion Swedish kronor from last year's 3.88 billion kronor. Earnings per share grew 192 percent to 3.33 kronor from 1.14 kronor a year ago.

The results were benefited by a 7.6 billion kronor capital gain benefit from the divestment of iconectiv.

EBITA, a key earnings metric, grew 150 percent from last year to 15.52 billion kronor. EBITA margin improved to 27.6 percent from 10.0 percent last year.

Adjusted EBITA was 15.82 billion kronor, up 104 percent from last year. Adjusted EBITA margin grew to 28.1 percent from prior year's 12.6 percent.

Adjusted gross margin grew from last year, driven by improvements in Networks and Cloud Software and Services.

Net sales for the quarter dropped 9 percent to 56.24 billion kronor from prior year's 61.79 billion kronor. Organic sales declined 2 percent, despite growth in three out of four market areas.

The company said it recorded strong commercial momentum with significant customer agreements including in India, Japan and the UK.

In the quarter, Networks sales declined 11 percent to 35.4 billion kronor, while Cloud Software and Services sales increased 3 percent. Enterprise sales declined 20 percent, impacted by the divestment of iconectiv in the quarter.

In Networks segment, organic sales growth in market area Europe, Middle East and Africa as well as in North East Asia, was offset by sales declines in the other market areas.

Sales in India were weak, as customer network investments remained low.

In pre-market activity on the Nasdaq, Ericsson shares were trading at $9.37, a growth of 14.7 percent.

In Stockholm, the shares were trading at 89.86 kronor, up 15.4 percent.

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