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Key Takeaways
- Ericsson on Tuesday reported first-quarter operating profit and earnings per share above forecasts as it took steps to offset falling sales.
- The Swedish telecom company posted a jump in gross margin from the year before.
- Ericsson’s CEO predicted sales will stabilize in the second half of 2024.
American depositary receipts (ADRs) of Ericsson (ERIC) rose Tuesday after the Swedish telecom company posted a much better-than-expected operating profit and predicted sales would be better in the second half of the year.
The company reported first-quarter earnings before interest and taxes (EBIT), excluding restructuring charges, of 4.3 billion Swedish kronor ($390 million), well above forecasts. Earnings per share (EPS) came in at SEK 0.77 ($0.07), also more than anticipated. However, revenue slumped 15% to SEK 53.3 billion ($4.87 billion), short of estimates.
Chief Executive Officer (CEO) Börje Ekholm noted that even though network sales slid 19% because “customers continued to be cautious with their investments,” Ericsson’s gross margin rose to 42.5%, up from 38.6% a year earlier. He attributed that to “our technology leadership, our competitive product portfolio, and the strategic actions we are taking, including on costs.”
Ekholm explained that if current trends continue, “we expect our sales to stabilize during the second half of the year, benefiting from recent contract wins and the normalization of customer inventory levels in North America.”
In a research note, Jefferies said it expected “gross margin strength to continue,” and that the market would focus on that along with the second-half sales stabilization.
Ericsson ADRs were up 1.2% to $4.84 as of about 12:15 p.m. ET Tuesday but are down about 22% so far in 2024.