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Q4 Looks Good
By Mark Evans | February 7, 2007
While cutting 2,900 jobs is far from positive news, Nortel also announced preliminary fourth-quarter results that surpassed the expectations of UBS Securities. Nortel said revenue will be $3.26-billion while gross margins will be about 40% - ahead of the $3.1-billion and 38.5% expected by UBS. In a research note, UBS analyst Robert Dennison said strength in CDMA and LG-Nortel joint venture likely accounted for the higher than expected sales in Q4. He said Nortel’s CDMA high-margin CDMA business likely helped gross margins.
Dennison is raising his 2007/2008E EPS estimates to $1.00/$1.86 from $0.66/$1.50 while increasing his stock target price to $28 from $26. “We expect near-term momentum in NT’s stock on the back of CDMA strength and ongoing cost reductions,” he said. “We remain concerned though on the outlook for 2008 when we expect high-margin CDMA revenues to decline substantially. We estimate CDMA contributed 80-90% of overall company EBT in 06.”
Update: The flurry of news over the past 24 hours (CFO Peter Currie’s resignation, the layoffs, the preliminary Q4 rsults) helped All Nortel, All the Time generate record traffic today (2,700 pageviews).
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Topics: Analyst Coverage, Financials |
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