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Will Top-Line Growth Aid Ericsson's (ERIC) Earnings in Q1?

Ericsson ERIC is scheduled to report first-quarter 2023 results on Apr 18, before the opening bell. In the last reported quarter, the company matched the adjusted earnings estimations as the bottom line matched the Zacks Consensus Estimate of 20 cents.

The Sweden-based telecom equipment provider is expected to have recorded higher aggregate revenues year over year owing to healthy demand for the company’s 5G solutions and several deals wins worldwide. Ericsson’s approach to developing advanced artificial intelligence (AI) technology and cloud-native solutions strengthens its comprehensive portfolio, which is likely to have contributed to the top-line growth year over year.

Factors at Play

In the quarter under review, Ericsson inked an agreement with Virgin Media O2 to accelerate network modernization in the United Kingdom. Virgin Media intends to enhance 5G connectivity by utilizing Ericsson’s latest quad-technology baseband, multiband and industry-leading 5G Massive MIMO radio AIR 3258.  The technology also mitigates the adverse environmental impact as it will consume 30% less energy than available variants and a 40% reduction in weight and volume to expedite the network deployment. These developments are likely to get reflected in the upcoming results.

During the quarter, Ericsson announced that it has set up a quantum research hub in Montreal, Canada, to explore quantum-based algorithms in telecom networks and quantum computing. The hub is established in collaboration with the University of Ottawa and the University of Sherbrooke. Ericsson intends to employ post-doctoral fellows at the universities in the hub to support the quantum research projects of its researchers.

During the quarter, Ericsson collaborated with Orange Spain to introduce Spain’s first 5G Standalone network. Ericsson’s dual-mode 5G Core is based on cloud technology, which ensures greater flexibility, enables improvised solutions and enhances automation capabilities. Telkomsel, the leading telecommunication company in Indonesia, also accelerated digital transformation in the country in collaboration with Ericsson and Qualcomm. Telkomsel implemented enhanced 5G capacity and reduced latency by leveraging Ericsson’s 5G NR-Dual Connectivity technology in the 3.5 GHz and 26 GHz frequency spectrum.  These developments are likely to have positively impacted the company’s first-quarter revenues.

In the first quarter, Econet, Zimbabwe’s leading mobile telecommunications technology company, selected Ericsson to modernize its Radio Access Network and aid 5G network expansion. Tigo-Tanzania deployed Ericsson’s solutions to upgrade the existing 4G infrastructure and launch 5G in Dar Es Salaam, Dodoma and Zanzibar.

UAE-based telecommunication company du selected Ericsson to incorporate AI technology and Business and Operations Support Systems to enhance automation and improve operational efficiency. Ericsson’s advanced data-driven AI capabilities will ensure network optimization, improve customer experience, reduce costs and minimize the possibility of human error through automation. These notable developments are likely to have a positive impact on the company’s top line.

For the first quarter, the Zacks Consensus Estimate for total revenues is pegged at $5,988 million, which indicates growth from $5,899 million reported in the year-ago quarter. Adjusted earnings per share are pegged at 4 cents, suggesting a decline from 10 cents recorded in the year-earlier quarter.

Earnings Whispers

Our proven model does not predict an earnings beat for Ericsson this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here.

Earnings ESP: Ericsson’s Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is 0.00%, as both are pegged at 4 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Ericsson Price and EPS Surprise

Ericsson Price and EPS Surprise
Ericsson Price and EPS Surprise

Ericsson price-eps-surprise | Ericsson Quote

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Zacks Rank: Ericsson currently has a Zacks Rank #3.

Stocks to Consider

Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Meta Platforms META is set to release quarterly numbers on Apr 26. It has an Earnings ESP of +8.00% and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Earnings ESP for Motorola Solutions, Inc. MSI is +1.67% and carries a Zacks Rank of 3. The company is set to report quarterly numbers on May 11.

The Earnings ESP for Corning Incorporated GLW is +3.71% and has a Zacks Rank of 3. The company is scheduled to report quarterly numbers on Apr 25.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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