Why Ericsson Shares Are Higher Premarket Tuesday

Ericsson ERIC shares are trading higher after it reported first-quarter FY24 results.

Sales declined 15% Y/Y to SEK53.3 billion. In USD, sales of $5.13 billion missed the consensus of $5.34 billion.

Group organic sales declined by 14% Y/Y due to a decline of 19% in the Networks business as the customers continued to be cautious with their investments.

Read: Ericsson Powers Up: Secures EUR 420M Boost For Next-Gen Wireless Technology

Excluding restructuring charges, the gross margin improved to 42.7% from 39.8% a year ago, led by a competitive product portfolio, cost initiatives, improved commercial discipline, and increased IPR licensing revenues.

Adjusted EBIT margin improved to 8.1% from 6.4% a year ago. Adjusted EBITA margin improved to 9.6% from 7.7% a year ago.

Ericsson reported an EPS of SEK 0.77 (+71% Y/Y). In USD, EPS of $0.07 beat the consensus of $0.05. 

Free cash flow before M&A was SEK 3.7 billion in the quarter, benefiting from the operational improvements and lower working capital as it concluded an intense 5G roll-out phase in India.

As of March 31, 2024, net cash stood at SEK 10.8 billion. 

Outlook: In FY24, the company expects a further decline in the RAN market, at least through the end of this year, as customers remain cautious with their investments and normalization of the pace of investment in India. 

Ericsson projects the 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. 

In the second quarter, the company anticipates Networks gross margin (excluding restructuring charges) of 42%-44%, with margins to benefit from the improved business mix in the year’s second half.

Investors can gain exposure to the stock via IShares U.S. Digital Infrastructure And Real Estate ETF IDGT and Defiance Next Gen Connectivity ETF FIVG.

Also Read: Ericsson Cuts 1,200 Swedish Jobs Due to Falling Orders

Price Action: ERIC shares are up 7.93% at $5.17 premarket on the last check Tuesday.

Photo by Mats Wiklund via Shutterstock