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Why LM Ericsson Stock Jumped on Friday

By Anders Bylund – Jul 17, 2020 at 1:31PM

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The Swedish telecommunications equipment and services veteran beat the Street's expectations in the second quarter.

What happened

Shares of LM Ericsson (ERIC -1.50%) soared on Friday. The Swedish telecommunications infrastructure expert's stock rose as much as 14.2% thanks to a strong second-quarter earnings report. Ericsson cooled down slightly to a 13% gain as of 12:40 p.m. EDT today.

So what

Ericsson's sales were flat year over year in local currencies. Converted to U.S. dollars, revenue fell 2% to $5.74 billion; the Wall Street consensus pointed to approximately $5.6 billion. Earnings landed at $0.08 per share, up from $0.06 in the year-ago period and just above analysts' expectations of $0.07.

A cell tower transceiver in stark silhouette against a partly cloudy sky.

Image source: Getty Images.

Now what

CEO Borje Ekholm said that the COVID-19 pandemic has left Ericsson's financial results largely untouched so far, with orders for 5G equipment coming in fast. The company is taking steps to limit the human impact of the disease; 80% of Ericsson's workforce is working remotely.

Ekholm noted that the global health crisis has created uncertainties in the business environment but left Ericsson's full-year guidance targets intact until further notice. As a reminder, Ericsson expects full-year sales to stop near $24.3 billion in 2020. Management wants to raise its operating margin to 10% this year and at least 12% in 2022. Operating margins landed at 8.2% in this report, up from 7% a year earlier.

Ericsson's stock has gained a market-beating 10% in 2020 and 13% over the last 52 weeks.

Anders Bylund has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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