Nokia lifts its earnings forecasts

Nokia, the world’s largest mobile-phone maker, on Tuesday raised guidance for the third quarter on the back of higher-than-expected volumes and firmer pricing, sending the company’s shares up nearly 4 per cent.

The Finnish group said a combination of “stronger than expected sales during the first two months of the quarter, good cost control and one-time positive items” had led it to alter its forecasts for the three months to the end of September.

Investors reacted positively, sending the company’s shares up to close at €13.55. Analysts put the reaction down to relief in the market; in July the shares slumped 10 per cent after Nokia warned of a weak third quarter.

The company’s more bullish stance on Tuesday came as no surprise to analysts, however. They pointed to an improvement in sales in recent months across the industry. Last week, Texas Instruments, the largest maker of chips for mobile phones, upgraded its financial outlook for the quarter on the back of strong demand.

“This is nothing dramatic following Texas Instruments’ upgrade last week,” said Per Lindberg at Dresdner Kleinwort Wasserstein. He also cautioned that the earnings upgrade was almost entirely attributable to extraordinary gains worth just over 1 cent from disposals that are expected to be completed this quarter, rather than any improvement in operating margins.

“Nokia has spent a lot of money on marketing, which is leading to higher revenues and higher costs which are linked to muted income changes,” he added.

Nokia said it was increasing earnings per share guidance from a range of €0.14-€0.17 to a range of €0.18-€0.19. Revenue guidance is up from a spread of €7.9bn to €8.2bn ($9.7bn-$10.05bn) to €8.4bn to 8.5bn.

The group said that geographical sales mix and a firmer pricing also meant the decline in the average sales price was lower than anticipated.