The first quarter of 2022 was one for the books, but not in the way that investors hoped. Valuation slashes were widespread as companies revealed they had battled margin compression and supply chain disruptions.
It goes without saying that we’ve found ourselves in a highly unique economic environment following a once-in-a-lifetime pandemic. Now, the second round of quarterly reports is quickly approaching.
There’s already a surplus of companies on deck this week to report quarterly results. One such company is Ericsson
ERIC
, a leading provider of communication networks, telecom services, and support solutions.
ERIC is a Zacks Rank #4 (Sell) with an overall VGM Score of an A and resides within the Zacks – Wireless Equipment Industry.
Let’s examine a few aspects of the company to see how it shapes up heading into Thursday; Ericsson will report before the opening bell.
Share Performance & Valuation
Ericsson shares have struggled immensely year-to-date, declining more than 30% in value and extensively underperforming the S&P 500.
Image Source: Zacks Investment Research
The picture doesn’t change much once expanding the timeframe to encompass a year’s worth of price action – ERIC shares have lost nearly 45% in value, underperforming the general market in this timeframe as well.
Image Source: Zacks Investment Research
Although the share performance is disheartening, ERIC sports an attractive 0.9X forward price-to-sales ratio, well below its five-year median value of 1.2X and nowhere near 2020 highs of 1.7X. Additionally, the value represents an enticing 72% discount relative to its Zacks Sector.
ERIC has a Value Style Score of an A.
Image Source: Zacks Investment Research
Quarterly Performance & Share Reactions
The company has posted mixed bottom-line results over its last four quarters, with two EPS beats and two EPS misses. The average EPS surprise over this four-quarter timeframe is 3.6%, and in its latest quarter, ERIC missed bottom-line expectations by a concerning 33%.
Top-line results have been primarily weak, with Ericsson reporting quarterly sales under expectations in six of its last ten quarterly reports. However, the company did post a marginal 0.4% top-line beat in its latest quarter.
Shares react well to EPS beats and poorly to bottom-line misses; over its last five EPS beats, shares have moved upwards four times, and over its previous five bottom-line misses, shares have moved downwards three times.
Growth Estimates
ERIC is forecasted to generate $6.6 billion in revenue for the quarter, good enough for a marginal 1.2% uptick in quarterly revenue from the year-ago quarter.
Additionally, the $0.16 EPS estimate reflects a solid double-digit increase in earnings of 15% year-over-year. Over the last 60 days, analysts have left their quarterly estimates unchanged.
Image Source: Zacks Investment Research
Bottom Line
Although the company sports solid valuation metrics, the poor share performance, inconsistent quarterly results, and its Zack Rank #4 (Sell) lead me to believe investors would be better off staying on the sidelines for this quarterly release.
Instead, investors seeking exposure to the industry should consider Qualcomm
QCOM
. QCOM is a Zacks Rank #2 (Buy), and the company is forecasted to register a 50% growth in the bottom-line year-over-year.
Additionally, QCOM’s annual revenue is forecasted to climb by 33% in FY22.
Image Source: Zacks Investment Research
Zacks Names “Single Best Pick to Double”
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.
Click to get this free report
