Why Ericsson Stock Fell Last Week


Jul. 25 2017, Published 7:04 a.m. ET

Ericsson stock fell over 15%

Europe-based (EFA) telecom equipment company Ericsson (ERIC) fell 15.3% in the week ended July 21, 2017. The stock fell 16.7% on July 18, 2017, after Ericsson reported disappointing 2Q17 results. Ericsson’s revenue in 2Q17 fell 8% YoY (year-over-year) to 49.9 billion Swedish kronor and over 13% YoY on a constant currency basis. GAAP net loss reported in 2Q17 was $1 billion Swedish kronor, or $120 million.

For the quarter ended in June 2017, Ericsson reported non-GAAP (generally accepted accounting principles) EPS (earnings per share) of $0.02 compared to analyst estimates of $0.05.

During the company’s earnings call, CEO Borje Ekholm stated, “We are not satisfied with our underlying performance with continued declining sales and increasing losses in the quarter. Execution of our focused business strategy is gaining traction.”

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Revenue expected to fall in fiscal 2017

Analysts expect weak macro conditions to negatively impact revenue over the next few quarters. Analysts expect Ericsson’s revenue to fall 6% YoY to $5.6 billion in 3Q17, 9.1% YoY to $6.9 billion in 4Q17, and 7.5% YoY to $24.1 billion in fiscal 2017. Analysts expect a revenue decline of 3.3% YoY in fiscal 2018 as well.

Ericsson stock has fallen almost 15% in the trailing 12-month period after falling 37% in 2016. Peer companies Cisco (CSCO), Juniper (JNPR), and Nokia (NOK) have generated returns of 3.7%, 24%, and 6.3%, respectively, in the trailing-12-month period.


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