Ericsson Stock: The Recent Impact



Ericsson stock has fallen more than 18% since 2Q17 results

The stock of telecom equipment company Ericsson (ERIC) has fallen more than 18.0% since its fiscal 2Q17 results were announced on July 18, 2017. Ericsson is currently trading at $5.92, which is 22.6% above its 52-week low of $4.83 and 21.0% below its 52-week high of $7.55.

In 2Q17, which ended June 30, 2017, Ericsson reported revenue of 49.9 billion Swedish kronor (or SEK), a fall of 8.0% YoY (year-over-year). Revenue fell 13.0% YoY on a constant currency basis.

During Ericsson’s 2Q17 earnings call, CEO (chief executive officer) Börje 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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Fall in profit margins

Ericsson’s GAAP (generally accepted accounting principles) net loss was 1.0 billion SEK ($120.0 million) in 2Q17. Non-GAAP EPS (earnings per share) was $0.02 below the analyst estimate of $0.05. Gross margin fell from 32.3% in 2Q16 to 27.9% in 2Q17. Its operating margin also fell from 5.1% to -2.5% in the same period. Profit margins were impacted by a decline in sales driven by lower demand in Europe, the Middle East, Africa, and Latin America.

Ericsson has a market cap of $19.8 billion. Peer companies Cisco Systems (CSCO), Nokia (NOK), and Verizon (VZ) have market caps of $153.0 billion, $35.0 billion, and $196.0 billion, respectively.


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