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Why Nokia OYJ Shares Are Soaring Today

By Anders Bylund - Updated Feb 1, 2018 at 12:08PM

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The Finnish networking titan sees the light at the end of the 5G wireless networking tunnel.

What happened

Shares of Finnish telecom infrastructure giant Nokia (NOK 1.08%) soared in Thursday's morning session, rising as much as 16.6% on a strong fourth-quarter earnings report. As of 11:30 a.m., EST, Nokia's stock had settled down at a still-impressive 12.5% gain.

So what

Nokia's fourth-quarter net sales held steady year over year at 6.7 billion euro or $8.4 billion. Adjusted earnings rose 8% to 0.13 euro or $0.16 per share. Analysts would have settled for earnings of approximately 0.11 euro per share on sales near 6.4 billion euro.

The Nokia Technologies segment, which manages and commercializes the company's portfolio of technology patents, saw sales rise 79% to 554 million euro. These gains rested on a multiyear patent licensing deal with Chinese peer Huawei and the settled arbitration of a contract dispute with BlackBerry (BB 1.11%). The division accounted for 39% of Nokia's operating profits, up from 17% in the year-ago period.

Nokia's logo overlaid on the backdrop of a sparsely populated city sidewalk.

Image source: Nokia.

Now what

This strong report was a welcome respite from the third quarter's revenue miss and gloomy guidance. Share prices fell 20% on that report and never quite recovered. Even now, this morning's swift jump still leaves Nokia investors 10% below prices seen in late October.

Looking ahead, Nokia CEO Rajeev Suri expects soft networking sales in 2018 but a strong bounce in 2019 and beyond. He said:

For 2019 and 2020, we expect market conditions to improve markedly, driven by full-scale rollouts of 5G networks. As those rollouts occur, Nokia is remarkably well-positioned. Unlike previous generations of technology, 5G requires a coordinated, holistic approach across all network elements, far beyond radio. That requirement plays to the strength of our end-to-end portfolio and our 5G Future X architecture.

This refreshing dose of long-term market optimism gave investors solid reason to boost Nokia's stock price today.

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