What's Going On With Ericsson Stock Friday?

Ericsson ERIC stock is trading lower Friday after it reported its second-quarter FY23 results.

The company reported sales growth of 3% year-on-year to SEK 64.4 billion ($6.125) billion, in line with the consensus of $6.130 billion.

Group organic sales declined by 9% Y/Y. Networks' organic sales decreased by -13%, partly mitigated by a 20% organic growth in Enterprise.

The sharp decline in sales in North America was partly offset by solid sales development in India. In Networks, Ericsson saw strong execution with record build-out speed in India, which now has a leading market share. 

It reported an EPS loss of SEK (0.21) versus SEK 1.35 last year. Adjusted EPS of $0.07 beat the consensus of $0.04.

Adjusted gross margin contracted 390 basis points to 38.3% due to business mix changes in Networks.

Adjusted EBIT margin declined by 740 bps to 4.4% as the adjusted EBIT declined 62% Y/Y after some of its major customers for 5G networks pulled back on spending.

Adjusted EBITA declined 51% Y/Y to SEK 3.7 billion.

Free cash flow before M&A was SEK (5.0) billion due to lower EBIT and payment to the U.S. Department of Justice (DOJ).

Outlook: For Q3, Ericsson expects a similar market mix and trends for Q2. In addition, Q3 will benefit from an early impact of its strong focus on cost-out execution. Overall, it expects the Q3 EBITA margin to align with or be slightly higher than Q2, followed by a seasonally stronger Q4. 

The company forecast 5G subscriptions to top 1.5 billion by end-2023 and reach 4.6 billion by 2028. 

Ericsson focused on reaching the lower end of the 15-18% EBITA margin long-term target range in 2024.

Price Action: ERIC shares traded lower by 8.89% at $5.23 premarket on the last check Friday.