Ericsson Q4 Results Up, Lifts Dividend, Backs Targets; Stock Climbs

Business

Shares of LM Ericsson were gaining more than 7 percent in Swedish trading as well as in pre-market activity on Nasdaq, after the telecom equipment maker reported Tuesday higher profit and sales in its fourth quarter with strong demand. Further, the company lifted its full-year dividend, and maintained targets for fiscal 2022 EBIT growth as well as long-term target of EBITA margin.

The company noted that with a full-year EBIT margin of 13.9 percent, it reached 2022 target one year early.

For fiscal 2022, Group EBIT target of 12 percent-14 percent remains, excluding the Vonage-related segment. However, the target becomes less relevant, and key focus is therefore now to accelerate the pace towards reaching its long-term target of EBITA margin of 15-18 percent.

After delivering an EBITA margin of 14.6 percent in 2021, its ambition is to reach the long-term target no later than in 2-3 years.

Börje Ekholm, President and CEO, said, “Based on current business momentum, we expect fundamentals to remain strong in our core mobile infrastructure business during 2022. We will continue to increase investments in R&D to sustain our technology leadership and strengthen our competitive position to take advantage of the rollout of 5G networks.”

The board has proposed to the Annual General Meeting a dividend to the shareholders of 2.50 kronor per share for 2021, compared to 2.00 kronor per share paid last year.

For the fourth quarter, net income attributable to owners of the parent company increased to 10.08 billion Swedish kronor or 3.02 kronor per share from the prior year’s 7.52 billion kronor or 2.26 kronor per share.

Reported EBIT was 11.9 billion kronor, up 8 percent, and EBIT margin improved to 16.6 percent from 15.8 percent last year. Adjusted EBIT grew 12 percent to 12.3 billion kronor, and adjusted EBIT margin grew to 17.3 percent from 15.8 percent last year.

Gross margin improved in all segments to 43.5 percent from 40.6 percent last year excluding restructuring charges.

Group reported sales for the fourth quarter increased 3 percent to 71.3 billion kronor from 69.6 billion kronor a year ago. Sales adjusted for comparable units and currency grew 2 percent.

Sequentially, sales climbed 27 percent.

In the fourth quarter, sales were driven primarily by 5G deployments in market areas North America and Europe and Latin America as well as by growth in Digital Services in Middle East and Africa.

Sales in Mainland China in Networks and Digital Services declined.

In Stockholm, Ericsson shares were trading at 108.10 kronor, up 7.71 percent.

In pre-market activity on Nasdaq, the shares were gaining around 6.5 percent to trade at $11.61.

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