Ericsson fourth-quarter sales weak, shares seen down

STOCKHOLM (Reuters) - Mobile telecom gear maker Ericsson posted fourth-quarter operating profit roughly in line with expectations on Tuesday and said business in North America had slowed further.

Sales at Ericsson, the world number one mobile network equipment maker, were 68.0 billion Swedish crowns (5 billion pounds), below a forecast of 70.0 billion. The gross margin was 36.6 percent against a mean forecast of 34.7 percent.

Following are comments from analysts, fund managers:

UBS (from note to clients)

"Ericsson trades on 9x '15E EV/EBITDA in-line with peers and 18x P/E vs. peers on 16x. Despite the recent run, we expect the stock to be robust given the solid gross margin and EBIT beat clean of hedging."

MORGAN STANLEY (from note to clients)

"After a decent run, the shares are due a breather and we'll get one today, but nothing is really wrong."

"The headline revenues are a miss, 68bn SEK vs consensus at 70.2 bln, and down 2 percent ex-FX looks weak and is a 3 percent miss, and Networks has gone from +7% Y/Y in 3Q to -7% this time."

"The management comments are quite scarce, but they do flag ongoing weakness in North America which caps numbers in 2015 probably, but Europe is picking up and FX is a tailwind offsetting so don't expect big estimate changes tomorrow. Stock likely off 2-4 percent on this after good run."

CREDIT SUISSE (from note to clients)

"Mixed bag – US continues to weigh on results."

"Extrapolating Q4 results, we believe consensus has scope for downward revision of around 1-2 percent to top-line for 2015/2016, but with higher base of gross margins (36.6 percent for year ending 2014 and assuming further improvement of ~50 to 75bp yoy going into 2015) and ongoing opex reductions, we believe EBIT estimates might see only minor downside (around 1-2 percent)."

INGE HEYDORN, FUND MANAGER, SENTAT ASSET MANAGEMENT (has no stake in Ericsson)

"Sales are weak. The market is in an investment phase in 4G but sales, excluding currency gains, are down 2 percent year-on-year."

"I'm surprised top-line is so weak. We are in a global 4G rollout and Ericsson has negative sales growth. It could be really bad going forward."

"Margins are decent, especially in Networks."

"I think Ericsson shares will fall, by some 3 to 5 percent. Personally, I think shares should fall by much more. I don't understand the current valuation as it is an ex-growth company."

GREGER JOHANSSON, REDEYE (research firm)

"Ericsson's Q4 report was mixed with sales and income below expectations while the gross margin was strong. The firm unfortunately does not indicate much about the future except for the North American market which will continue to be weak and that they will take restructuring charges of 3-4 billion crowns in 2015."

"Considering Ericsson shares have been strong lately and that the report was a bit weak, we think Ericsson shares will trade below 100 crowns."

($1 = 8.2870 Swedish crowns)

(Reporting by Olof Swahnberg; Editing by Simon Johnson)