Nokia surges after proving its 5G strength

Nokia Oyj shares rose the most in 17 months after delivering an earnings beat that reassured investors the Finnish network-equipment vendor can capitalize on 5G.

The company kept its profit guidance for 2019 and 2020 unchanged after topping analysts’ estimates for the second quarter, signaling management confidence that sales of fifth-generation mobile gear will kick in after an early stumble caused by shipment delays. The stock rose as much as 9% in early trading in Helsinki.

“We are catching up where we are behind, and further distancing ourselves where we are already ahead,” Chief Executive Officer Rajeev Suri said on a conference call with reporters. “All our current 4G customers who have decided on 5G have chosen Nokia.”

Nokia has tried to dispel notions that it’s lagging behind rivals on the latest wireless technology, which offers super-fast download speeds, minimal delay and higher capacity than current 4G networks. Its bumpy 5G ride still looks set to continue, with the company guiding for a “soft” third quarter, followed by a “particularly strong” end to the year, and Suri noted that there are risks to execution in the months ahead.

“Even though the result was really good, it unfortunately can be attributed to strong swings from one quarter to the next,” Inderes analyst Mikael Rautanen said on a webcast. “Pressure remains strong. Reaching full-year guidance will require a lot of work.”

Nokia is in a three-way battle with Sweden’s Ericsson AB and China’s Huawei Technologies Co. for dominance in the cellular-network market. Its task won’t be easy, as Ericsson strives to claw back lost market share and Huawei works hard to maintain its global industry dominance amid Washington’s trade war with Beijing.

While the Nordic vendors may be able to pick up more work as Huawei is targeted by a U.S. campaign to have it blocked on security grounds, Suri said its business in China is facing challenges amid increased support for local vendors, which include Huawei and ZTE Corp.

“It is not exactly a new development, but it’s fair to say that that support has increased,” Suri said.

Nokia’s second-quarter adjusted operating profit of 451 million euros ($502 million) compared with an average estimate of 303 million euros in a Bloomberg survey. The company still expects adjusted operating margin of 9% to 12% for the full year 2019.

Before Thursday, its shares had declined 7.5% year-to-date, underperforming arch-rival Ericsson, which had gained 5.9% in the same period.

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Nokia surges after proving its 5G strength