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Ericsson Posts Loss In Q3, Lifts FY20 Sales View, FY22 Margin View; Stock Up

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Shares of Ericsson (ERIC) were gaining around 8 percent in the morning trading in Sweden after the telecom equipment maker lifted its fiscal 2020 sales outlook driven by a stronger 5G market, despite reporting a loss in its third quarter.

For fiscal 2022, the company projects operating margin of 12 percent to 14 percent, compared to previous estimate of greater than 12 percent.

Börje Ekholm, President and CEO of Ericsson, said, "The largest market for 5G infrastructure will be China where deployments are expected to start near term. We have invested to increase our market share, however it is still too early to assess possible volumes and price levels. Based on historic experience we expect to have challenging margins initially but positive margins over the lifespan of a contract."

For the third quarter, net loss attributable to stockholders of the parent company was 6.23 billion Swedish kronor or 1.89 kronor per share, compared to net income of 2.75 billion kronor or 0.83 kronor per share in the previous year.

Operating loss was 4.2 billion kronor, compared to operating income of 3.2 billion kronor last year. In the latest quarter, the company made a 12 billion kronor or $1.23 billion provision related to resolving the U.S. investigations to cover an estimated monetary sanction of $1.0 billion, plus other related costs.

Excluding charges, operating income was 6.5 billion kronor with an operating margin of 11.4 percent. Gross margin was 37.7 percent, compared to 36.5 percent last year.

Ericsson's quarterly net sales grew 6 percent to 57.1 billion kronor from 53.8 billion kronor last year. Sales adjusted for comparable units and currency increased 3 percent driven by strong growth in North America and North East Asia.

Looking ahead for fiscal 2020, Ericsson now expects sales in a range of 230 billion kronor to 240 billion kronor, compared to previous estimate of 210 billion kronor to.220 billion kronor. The revision reflects currency movements and a stronger 5G market.

Operating margin target for 2020, excluding restructuring charges, remains unchanged at greater than 10 percent of sales. The outlook mainly incorporates an initially higher cost level for newly introduced 5G products.

Further, the company said it is increasing investments in IoT within Emerging Business, and would incur losses of 1.5 billion kronor to 2 billion kronor in the segment, compared to previous estimate of break-even.

In Sweden, Ericsson shares were trading at 90.18 kronor, up 7.64 percent.

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