Why Ericsson Stock Is Falling Today

Ericsson ERIC stock is trading lower Tuesday morning after it reported its third-quarter FY23 results. The company reported a sales decline of 5% year-on-year to SEK 64.5 billion ($5.96) billion, missing the consensus of $6.27 billion.

Group organic sales declined by 10% Y/Y. Networks' organic sales decreased by 16%, partly offset by 5% growth in Cloud Software and Services and 11% in Enterprise.

ERIC reported an EPS loss of SEK (9.21) versus SEK 1.56 last year. Adjusted EPS was $0.07 compared to a consensus of $0.07.

Adjusted gross margin contracted 220 basis points to 39.2% due to business mix changes in Networks.

Adjusted EBIT margin plunged by 460 bps to 6.0% as the adjusted EBIT declined 46% Y/Y.

Adjusted EBITA declined 39% Y/Y to SEK 4.7 billion. The margin came at 7.3% vs. 11.3% Y/Y.

Free cash flow before M&A was SEK (0.5) billion.

Outlook: Ericsson expects lower than-normal seasonality in sales between Q3 and Q4 for Networks and Cloud Software and Services.

The company expects a Q4 EBITA margin of 10%.

Ericsson reiterated long-term EBITA target of 15% - 18%.

Price Action: ERIC shares traded lower by 5.88% at $4.48 premarket on the last check Tuesday.