Fun with (Lehman Brother's) Numbers ...
... which are quite optimistic for those usually somewhat conservative souls.
<< Eric, some speculative fun with numbers. ... Can we expect to see numbers like options 2 or 3? >>
I'd sure like to think so. I think Nokia is setting us up for a very good quarter. We know what the ASP is. The key is now unit sales, margins, and DCF
I've just been reviewing a very detailed Lehman Brothers (LB) Nokia Preview dated yesterday as well as their new (much) revised handset forecast -- both supplied to me by Fidelity -- and I've excerpted part of a few tables from it below.
Even though LB retains a 2EW rating on NOK (which they have had for several years) and has set a modest new price target of $22, ~16x their CY07 $1.38 estimate) and favors MOT with a 1OW and a $26 price target. I'll be quite satisfied if Nokia hits their estimated numbers for the quarter (and the year -- although I'm hoping their year view is overly conservative and they note there is potential upside to margins), delighted if they beat them this quarter, and disappointed if they don't.
Overall and given market vagaries I think the Q1 estimates are reasonably realistic estimates and I won't try to 2nd guess Tim Luke and Stuart Jeffrey at this juncture, even though 215m Q1 units global sell-in looks high to me at the moment by 4m to 5m units and I think margin could be higher, pushing up the EPS by at least 1 Euro cent. I'm guessing that they whisper number right now is €.23, and anything below will disappoint unless Q2 guidance is uncharacteristically strong.
Lehman Brothers on Nokia (NOK) Q1 2006 and FY 2006
·
1Q06 1Q06 FY06 FY06
Nokia (Eur M) LB Consensus¹ LB Consensus¹
============= ====== ========== ======= ===========
Revenue €8,996 €8,302 €39,487 €36,500
- annual growth 21.6% 12.2% 15.5% 6.8%
- sequential growth -12.9% -19.7% 15.5% 6.8%
Gross Profit €3,033 €2,828 €13,555 €12,556
Gross margin 33.7% 33.9% 34.3% 34.4%
EBIT €1,209 €1,063 €5,413 €4,999
- margin 13.4% 12.8% 13.7% 13.7%
PTP €1,291 €1,222 €5,730 €3,880
Net Income €917 €831 €4,083 €3,808
EPS (reported) €0.22 €0.20 €1.01 €0.91
$0.27 €1.23
·
1Q06 1Q06 FY06 FY06
Divisional Detail LB Consensus¹ LB Consensus¹
================= ====== ========== ======= ===========
Nokia handset units 73m 69m 328m 305m
ASPs €102 €98 €99 €97
Global units (m) 215m 205m 950m 895m
Market share 34.0% 34.0% 34.5% 34.1%
·
Mobile phone revenue €5,407 €4,937 €23,136 €21,325
Multimedia revenue €1,983 €1,677 €8,644 €7,523
Enterprise revenues €132 €179 €961 €1,033
Network revenues €1,478 €1,503 €6,765 €6,938
·
Mobile phone margin 16.8% 16.8% 16.7% 16.5%
Multimedia margin 16.1% 14.7% 16.2% 15.9%
Networks margin 11.0% 10.3% 12.6% 11.5%
Enterprise margin -55.5% -38.5% -21.7% -16.7%
·
¹ Consensus numbers are from SME Direkt (March 6th) and Reuters were
similar. For sure they are both up today however.
·
2005 2006(e) 2007(e) 2008(e)
====== ======= ======= ========
Global handset market 812,0m 950.0m 1,040m 1,110.0m
Nokia market share 32.7% 34.5% 35.0% 36.0%
Nokia units 265.2m 327.5m 364m 399.6m
Nokia ASP €104.3 €100.0 €94.9 €90.1
Handset Division revenues €27,653 €32,741 €34,548 €36,013
Lehman Brothers on Motorola
It is unfortunate that Lehman Brothers has not published a Moto Q1 preview or recently published a detailed update on MOT. However, these bytes appear in their handset update ...
For Motorola, recent meetings with management and key company partners left us encouraged with near-term trends for the company. We retain our 1OW rating on MOT and consider our higher ests of $9.9B in sales and $0.30 on 45.5M units could prove conservative although we expect ASPs to move lower on share gains (ests are $141 vs $145 in 4Q05). For 2Q06, we expect normal seasonality of flattish to up slightly. Our price target remains $26, or around 20x our CY06 estimate of $1.30.
That's pretty aggressive, it seems to me, even though they call it conservative.
LB is forecasting that Nokia will ship 73 million units in Q1'06 and that is
87% of Nokia's Q4'05 unit sell-in of 83.7 million units. That's aggressive but certainly possible.
LB is forecasting that Motorola will ship 45.5 million units in Q1'06 and that is
101% of their Q4'05 unit sell-in of 44.7 million units.
If Moto hits close to 45.5 million units, meets it, or exceeds it, holds ASP above $140, and increases operating margin above 11% that's one heck of a quarter's performance, and their share gain and reduced share gap to Nokia will give some pause. Assuming 215m unit sell-in (down only 9% from Q4'05) we are talking 21.2% share, and if sell-in is a more modest 211 million units we are looking at 21.6%.
We shall see what we will see. Samsung tonight should be interesting.
Best,
- Eric - |
