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What Impacted Ericsson’s Share Price This Year?

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Ericsson’s rising stock

Europe-based (EFA) Ericsson (ERIC) has seen its stock rise ~10% so far this year, after declining 36% last year. In 2016, Ericsson faced a slow macroenvironment, driven by the saturation of developed markets in the US (SPY) and Europe and a slow transition to 4G in developing markets.

Telecom companies AT&T (T) and Verizon Communications (VZ) have reduced spending over the past 18 months, which has severely impacted revenue growth and profit margins.

Meanwhile, we’re seeing growing competition from China’s (FXI) Huawei, which is gaining market share rapidly, and this penetration has negatively impacted Ericsson.

Ericsson’s turnaround efforts

Ericsson has focused on reducing costs and improving profit margins in order to offset declining revenues. The stock has risen almost 9% since October 20, 2017, when the firm announced its 3Q17 results.

Ericsson’s revenues in 3Q17 fell 6% YoY (year-over-year) to 47.8 billion Swedish kronor, or ~$5.9 billion. Analysts expected the firm to post revenues of $5.6 billion for the quarter ended September 2017.

Ericsson reported non-GAAP (generally accepted accounting principles) EPS (earnings per share) of -$0.07, which was below the analyst estimate of -$0.02, and its operating margin fell to 10% in 3Q17 from 0.7% in 3Q16.

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