Last week’s earnings season was bad news for Nokia (NOK), a telecom equipment supplier, and State Street (STT), a regional bank. Investors who waited for a decade for Nokia to recover should give up.
On July 14, Nokia lowered its full-year sales outlook. It expects sales of EUR 23.2 billion to EUR 24.6 billion. Operating margins in the range of 11.5% to 13% will not meet expectations of 11.5% to 14%. The slow turnaround in the struggling firm will discourage value investors from keeping the stock.
After enjoying a rally from the April lows, regional banks do not have the fundamental strength to hold those gains. State Street posted Q2 GAAP EPS of $2.17. Revenue increased by 5%, thanks to NII growth of 18%. Fee revenue only rose by 2%.
Investors are wary of STT stock. While another rate hike widens NII profitability, the firm already attracted $200 billion in deposits. It will become increasingly harder to expand margins from customer deposits.
The steep selling of AT&T (T) stock, instigated by an analyst downgrade, spread to the media sector. Its spinoff, Warner-Bros Discovery, pulled back. T and WBD have too much debt and weakening cash flow. Beware of both companies.
