Nokia Shines

Nokia (NYSE:NOK) is on pace to resume its uptrend after posting strong second-quarter results and raising its guidance for the year. COVID-19 costs may have pulled revenues 10% lower from last year. But chances of a dividend reinstatement are increasing after Nokia posted free cash flow of EUR 265 million.

Nokia posted revenue of EUR 5.09 billion, down 10.5% from last year. Operating margins (adjusted) of 8.3% beat the 4.71% consensus estimate. The company’s "5G Powered by ReefShark" shipments are up sharply in Q2. Nokia said it is on track to win more deals. It ended Q2 with 83 5G deals. It has over 180 private 4G and 5G deals.

The margin improvement suggests that Nokia settled its licensing dispute with Daimler and its suppliers. Patent revenue of EUR 1.3 billion is due to lower brand licensing. The expiration of some small patent licensing and COVID-19 also hurt results.

Nokia forecast free cash flow for the full year 2020. As 5G revenues accelerate, the company is in a position to resume its dividend. Conversely, markets may still bid shares higher if Nokia decides to deploy the dividend capital back to R&D instead. That would strengthen the long-term viability and strength of the telecommunications giant.