Swedish telecommunications company Ericsson (NASDAQ: ERIC) announced its first-quarter 2022 earnings today in what has been a particularly trying period for the company. The firm was under a high degree of scrutiny following an internal investigation in February that revealed that it may have made payments to the Iraq-based Islamic State militant group.
Ericsson stated today that it’s expecting to be fined by U.S. regulators as a result of this misconduct, which only heightened the need for a positive earnings call for the company.
What did Ericsson report in its earnings call?
Ericsson posted adjusted earnings per share (EPS) of $0.10 against an expected $0.15 per on revenue of $5.89 billion, which narrowly beat analyst estimates of $5.88 billion. This represented net revenue growth of 10% year-over-year (YoY) — largely driven by networks in North America, Latin America, and Europe.
Network sales grew by 12.1% YoY to spearhead this revenue growth, with other segments such as digital services and managed services also growing by 4.3% and 2% respectively.
So should I invest in Ericsson?
Ericsson stock is currently down almost 23% this year so far, however it should be noted that this has been exacerbated by a more than 9% drop today following the news of its impending regulatory fine. The company is still driving growth across many sectors and maintains a significant proportion of the market. According to President and CEO, Börje Ekholm,
“We see strong business momentum and our investments in technology and a resilient supply chain have allowed us to continue to win market share and deliver on customer commitments in spite of global supply chain challenges.”
A company seemingly somewhat resistant to current global supply chain strife is hard to come by, so Ericsson is certainly a company worthy of consideration. However, it’s exceptionally difficult to simply look past the gross misconduct discovered by the company in relation to Iraq — misconduct that appears to stretch back as far as 2011.
Currently, according to Ekholm at least, the magnitude of the fines to be levied “cannot at this time be reliably estimated.” Investors appear to believe they will be significant considering today’s unreserved sell-off.
Despite Ericsson’s many promising aspects, ethical investors will need to ask themselves some questions before becoming a shareholder. At the very least, patience beyond the U.S. Department of Justice’s investigation and resultant disciplinary action should be practiced before investing.
Financial Writer at MyWallSt
Pádraig’s favorite stock is Nike. Growing up as a sports fanatic, seeing Nike collaborate with athletes like Jordan, Lebron, and Ronaldo inspired him and cemented the brand in his mind. Now, despite having failed miserably in his attempts to earn a fabled Nike sponsorship, he still believes in the innovation and creativity behind Nike and is convinced they will only grow stronger as the world's leading sports brand.