Nokia (NYSE:NOK) shattered investor confidence last quarter when it cut its dividend and posted weak 5G orders. Its latest earnings report, posted on Feb. 6, is a positive reversal. The company’s revenue grew slightly by 0.4% to 6.9B EUR. GAAP EPS of 0.15 EUR helped the stock rebound.
Nokia ended the year with EUR 1.7 billion as Q4 came in with EUR 1.4 billion in free cash flow. The beat-up firm posted 5G deals with 66 commercial customers. It has 5G on 19 live networks. Continued demand for 5G will drive Nokia’s performance higher in 2020.
In winning over 100% outside of China (90% win rate with China), Nokia is commanding the market as customers migrate from 4G to 5G.
Higher operating margin of over 30% and led by networking will lift Nokia’s free cash flow. Once it covers cash needs, Nokia will reinstate its dividend.
Although it faces heavy pressure in China, Nokia’s net sales are highest in both North America and Europe. China, Latin America, and Middle East/Africa are the weakest segments. In short, the surge in net cash in Q4/2019 is a promising development. Nokia will bring back its dividend sooner than markets realize.
Nokia stock should attract buyers from here and is worth at least $5.00 a share.
Disclosure: the author owns Nokia stock.
