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Shares of Nokia (NOK) stock gapped Tuesday after the Finnish company received regulatory approval from Chinese authorities to sell its mobile phone unit to Microsoft (MSFT). Now that Nokia is one step closer to completing the $7.3 billion deal, is it time to buy?
Nokia operates as a mobile communications company worldwide. It operates in three segments: Devices & Services, HERE, and Nokia Siemens Networks. The Devices & Services segment offers feature mobile phones and smartphones consisting of the windows phone operating system; and spare parts.
The company sells its products to mobile network operators, distributors, independent retailers, corporate customers, and consumers. Nokia was founded in 1865 and is headquartered in Espoo, Finland. It employs over 55,000 people worldwide and brought in $39.8 billion in sales in the most recent fiscal year.
Nokia is tentatively scheduled to report first-quarter results on April 29. At first glance, the top-line estimate doesn’t look very good: Analysts expect $3.91 billion in sales, nearly 50% less than what was posted this time last year.
However, much of this is due to lost revenue from discontinued operations–the previously mentioned Devices & Services business that Nokia is in the process of selling. These restructuring plans are expected to boost the company’s standing in the long run.
Meanwhile, Nokia is looking good in terms of earnings per share growth–analysts are calling for 233% bottom-line growth. Further, the consensus estimate has been revised up significantly in recent weeks, suggesting that Nokia will blow estimates out of the water. Looking farther ahead, Nokia is expected to post 867% earnings growth for FY 2014.
Before you buy any stock, you should always run it through my free Portfolio Grader ratings system. This Aggressive-ranked stock has improved significantly over the past 12 months. As of last May, Nokia stock was a D-rated sell. Since then, Nokia has improved its Fundamental Grade (B) as well as its Quantitative Grade (B), which measures the stock’s risk-to-return prospects.
In terms of its fundamental score, Nokia stock receives As on two metrics: Earnings surprises and analyst earnings revisions.
Meanwhile, it could stand to work on sales growth, operating margin growth, earnings growth, earnings momentum and return on equity, which all earn Cs. However, I anticipate that the company’s upcoming earnings announcement may warrant an upgrade on several of these fronts.
Bottom Line: As of this posting I consider Nokia stock a B-rated Buy.
Would you like to check the fundamentals backing up one of your stocks? For more stock grades, please visit my Portfolio Grader website!