Aug 04, 2017

Data Overview Summary

Target Price $7.25 Shares of Nokia have outperformed the industry it belongs to, in the last one year. In
52 Week High-Low $6.65 - $4.04
fact, the recent licensing and business partnership with Apple has removed a major
overhang on Nokia’s shares. Following the deal, Nokia got an up-front payment in
20 Day Average Volume 12,291,280
cash from Apple. The development aided Nokia's second-quarter results, where it
Beta 1.26 reported better-than-expected earnings per share and revenues. In addition, the
Market Cap 38.17 B company’s growth-by-acquisition strategy is encouraging. We are positive on Nokia's
Dividend / Div Yld $0.13 / 2.03%
acquisitions of Withings S.A. and Gainspeed. In early Jan 2016, Nokia Networks
gained control of Alcatel-Lucent. Notably, the company now expects to realize annual
Industry Wireless Equipment
operating cost synergies €1.2 billion in full-year 2018 from the deal. However, the
Industry Rank 221 / 265 (Bottom 17%) below-par performance of its Networks division continues to hurt Nokia. Also, its top
Current Ratio 1.57 line is vulnerable to adverse foreign currency movements since the company operates
globally.
Debt/Capital 16.57%

Net Margin -1.78%

Price/Book (P/B) 1.92 Elements of the Zacks Rank

Price/Cash Flow (P/CF) 38.58
Agreement Estimate Revisions (60 days)
Earnings Yield 4.29%

Debt/Equity 0.20
100% 100% 100% 100%
Value Score
P/E (F1) 23.36 Q1 (Current Qtr) Q2 (Next Qtr) F1 (Current Year) F2 (Next Year)
P/E (F1) Rel to Industry 22.89 Revisions: 2 Revisions: 2 Revisions: 3 Revisions: 3
Up: 2 Down: 0 Up: 2 Down: 0 Up: 3 Down: 0 Up: 3 Down: 0
PEG Ratio 1.23

P/S (F1) 1.50

Magnitude Consensus Estimate Trend (60 days)
P/S (TTM) 1.49

P/CFO 38.58

P/CFO Rel to Industry 38.64

EV/EDITDA Annual 58.15

Growth Score 60 30 7 Current 60 30 7 Current 60 30 7 Current 60 30 7 Current

Days Days Days Days Days Days Days Days Days Days Days Days
Proj. EPS Growth (F1/F0) 47.37% Q1 +20.00% Q2 +20.00% F1 +21.74% F2 +6.67%
Hist. EPS Growth (Q0/Q-1) 20.00

Qtr CFO Growth 239.01 Upside Zacks Consensus Estimate vs. Most Accurate Estimate
2 Yr CFO Growth 12.65

Return on Equity (ROE) 7.07%

(NI - CFO) / Total Assets -3.09

Asset Turnover 0.55 Most Accurate: 0.06 Most Accurate: 0.13 Most Accurate: 0.31 Most Accurate: 0.33
Zacks Consensus: 0.06 Zacks Consensus: 0.12 Zacks Consensus: 0.28 Zacks Consensus: 0.32
Momentum Score
Q1 0.00% Q2 8.33% F1 10.71% F2 3.13%
1 week Volume change 12.23%

1 week Price Cng Rel to Industry 5.37%

Surprise Reported Earnings History
(F1) EPS Est 1 week change 7.01%

(F1) EPS Est 4 week change 22.63%

(F1) EPS Est 12 week change 21.74%

(Q1) EPS Est 1 week change 14.29%

Reported: 0.09 Reported: 0.03 Reported: 0.13 Reported: 0.05 Average 4 Qtr
Surprise
Estimate: 0.04 Estimate: 0.04 Estimate: 0.08 Estimate: 0.05
Q End 06/17 Q End 03/17 Q End 12/16 Q End 09/16

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 The data on the front page and all the charts in the report represent market data as of 08/03/17, while the report's text is as of
07/31/2017

Overview
The company was an amalgamation of three companies, Nokia AB,
Finnish Rubber Works Ltd, and Finnish Cable Works Ltd. In early
1990s, management took a strategic decision to make
telecommunications its core business and Nokia divested all of its
non-telecommunication ventures accordingly. In Dec 2015, Nokia
completed the sale of the HERE high-definition mapping/navigation
business to a consortium of German automakers comprising BMW,
Daimler and Volkswagen (the owner of Audi). Consequently, results
at HERE have been reported as discontinued operations from the
third quarter of 2015.

The company, that officially took control of rival Alcatel-Lucent in Jan

2016, expects to realize annual operating cost synergies expects
annual cost savings of €1.2 billion in full-year 2018, excluding Nokia
Technologies.

Nokia currently reports in the following revenue generating segments:

Nokia Solutions and Networks (NSN): This segment provides

wireless and fixed network infrastructure, and networks service
platforms, as well as professional services to telecom operators
and service providers. The segment generated 88.8% of the
total revenue in 2Q17. Nokia also purchased the remaining
50% stake of this division from Siemens AG for $2.2 billion and changed its name from Nokia Siemens Network to Nokia
Solutions and Networks.

Nokia Technology Segment: This segment deals with the licensing of intellectual property rights to companies interested in
Nokia’s innovations. The segment generated 6.6% of the total revenue in 2Q17. The balance came from the Group Common
and Other segment.

Zacks Equity Research: NOK www.zacks.com Page 2 of 9

 Reasons To Buy:
Nokia reported better-than-expected earnings per share in the second quarter of 2017. Nokia reported better-than-
The bottom line also expanded on a year-over-year basis. Results were aided by the expected earnings per
licensing and business partnership with Apple. Following the deal, Nokia got an up-front share in the second
payment in cash from Apple.The payment boosted Nokia’s balance sheet. Nokia also quarter of 2017. The
outperformed on the revenue front in the quarter. bottom line also expanded
on a year-over-year basis.
We are also positive on Nokia's acquisitions of Withings S.A. and Gainspeed. Nokia has
been inking deals/making acquisitions for quite some time to drive growth. Nokia's
acquisition of Deepfield, earlier in the year, is also encouraging.

In Apr 2015, Nokia Networks entered into a definitive agreement with Alcatel-Lucent for its full acquisition for a total consideration of
Euro 15.6 billion (approximately $16.6 billion). In early Jan 2016, Nokia Networks finally gained control of Alcatel-Lucent . Nokia
expects to realize annual operating cost synergies €1.2 billion in full-year 2018 from the deal. Additionally, Nokia's decision to
expand its licensing agreement with Samsung is encouraging.

On the back of the above tailwinds, shares of Nokia have outperformed its industry over the last one year. The stock has gained
15.4% compared with the industry, which has appreciated only % over the same period.

Risks
We are concerned about the recent below-par performance of Nokia’s primary division– the Networks unit. What is worse is that
the company does not expect its struggling Nokia Networks unit to show any recovery in the near future. The company now
expects the primary addressable market for the Networks unit to decline in the band of 3% to 5% as opposed to the earlier
projection of a fall in the low-single digits.

Nokia's trailing 12-month return on equity (ROE) undercuts its growth potential. Not only has the company’s ROE of 8.2%
gradually decreased over last year, it compares unfavorably with ROE of 16.3% for the S&P 500 Index. This reflects the fact that
it is less efficient in using shareholders’ funds.

Last Earnings Report

Second quarter results Quarter Ending 06/2017

Report Date Jul 27, 2017

Nokia Corporation’s second-quarter 2017 earnings per share of €0.08 (approximately
$0.09) beat the Zacks Consensus Estimate of $0.04. In the year-ago period, the company Sales Surprise 3.33%
had reported earnings of €0.03 ($0.04) per share. EPS Surprise 125.00%
Quarterly EPS 0.09
Net sales declined year over year (on a comparable combined company basis) to €5.6
Annual EPS (TTM) 0.30
billion (approximately $6.18 billion). The top line surpassed the Zacks Consensus Estimate
of $5.98 billion but fell short of the year-ago figure of approximately $6.31 billion. This was
because revenues were hurt by the Nokia Networks’ disappointing performance. Also,
weakness in the Ultra Broadband Networks subgroup contributed to the soft results posted by Nokia’s flagship division.

Quarterly adjusted gross margin was 41.7% in the reported quarter compared with 38.9% a year ago. Operating margin increased 430
basis points (bps) to 10.2% on a year-over-year basis.

In fact, at quarter-end, Nokia’s net cash from operating activities was €1,309 million against - €616 million at the end of the year-ago
quarter.

Segmental Revenues

In the Nokia Networks segment, total revenue was approximately €4,971 million (around $5,467 million), down 5% year over year. The
division includes three reportable sub-units like Ultra Broadband Networks (which includes Mobile Networks and Fixed Networks
operations), Global Services (which includes the Global Services business group) and IP Networks and Applications (which includes the
IP/Optical Networks and Applications & Analytics operations). Notably, the decline in the Ultra Broadband Networks’ sub-group by 8%
to €2,165 million hurt the segmental sales.

In fact, net sales declined in all regions, apart from Asia Pacific (5%) and Middle East and Africa (5%), which led to the segment’s
below-par performance. The same declined by 16% in Latin America, 7% each in North America and Greater China, and 10% in
Europe.

However, segmental gross margin improved 150 bps to 39.1% in the reported quarter. Also, quarterly operating margin was 8.2%

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 compared with 6% a year ago.

The Nokia Technologies segment’s quarterly total revenue was €369 million (approximately $406 million), up 90% year over year.
Segmental gross margin was 95.4% compared with 96.4% in the year-ago quarter. Operating margin expanded significantly to 62.3%.

In Group Common and Other segment, net sales increased 14% to €307 million (approximately $338 million). Segmental gross
margin was 17.6%, down 170 basis points. In fact, this division incurred an operating loss in the quarter under review.

Outlook

Nokia officially took control of rival Alcatel-Lucent in Jan 2016, and continues to expect annual cost savings of €1.2 billion in full-year
2018, excluding Nokia Technologies.

For 2017, capital expenditure outlook for the company is approximately €500 million. Non-IFRS tax rate is now expected in the range of
25% to 30% in 2017 (old guidance: 30% to 35%).

The company anticipates net sales in its primary networks division to decline in 2017, which is in line with the primary addressable
market. However, the market conditions are expected to be more challenging than expected earlier. Consequently, the primary
addressable market for Nokia’s main unit is now expected to decline in the band of 3% to 5% as opposed to the earlier projection of a
fall in the low-single digits. Segmental operating margin is still forecasted to be in 8% to 10% range.

Recent News
Nokia and Xiaomi Ink Pact - Jul 7, 2017

Nokia has signed a deal with Chinese company Xiaomi for business collaboration and a multi-year patent license. This includes a cross
license to each company’s cellular standard essential patents. Per the business cooperation agreement, Nokia will provide network
infrastructure equipment for delivering high capacity besides low power requirements to benefit web providers as well as datacenter
operators.

LTE Network for Shanghai's Smart City Revamp - Jun 30, 2017

Nokia has announced plans to supply an LTE Network in the 700 megahertz spectrum band to Shanghai Oriental Pearl Group The
deployment will transform the Hongkou district of Shanghai through an array of smart city services. Nokia will provide advanced
wireless communications based on FDD-LTE technology for smart city as well as public safety applications.

Acquisition of Comptel - Jun 29, 2017

Nokia has completed its acquisition of Comptel Corporation, a Finnish telecommunications software company. The buyout boosts
Nokia’s software portfolio by adding capabilities that help digital service providers deliver new communications services to the market
faster. The purchase also enhances the acquiring company’s portfolio in several other ways including capturing data-in-motion.

Nokia 6 update - Jun 26, 2017

Nokia is on its way back to the U.S. HMD Global, the Finland-based company (which had acquired the rights to sell Nokia smartphones
last year) has recently announced that Nokia 6 phones would be sold in the U.S. from early next month. The phones will cost $229 each
.

High-speed fiber broadband service to Poland - Jun 22, 2017

Nokia inked a deal with Infracapital, the infrastructural arm of M&G Investments, to introduce a high-speed fiber broadband service to
central and northern Poland. This move was part of the Digital Poland 2014-2020 program. The service is expected to serve nearly
400,000 homes and approximately 2,500 schools in the rural areas of central and northern Poland.

Nokia Settles Dispute with Apple - May 23, 2017

Following the settlement, Nokia will get an up-front payment in cash from Apple. In fact, it will get additional revenues during the tenure
of the deal which is expected to be recognized from the second quarter of 2017.

Nokia has also agreed to provide certain products and services pertaining to network infrastructure to Apple. Moreover, Apple will
resume having some Nokia digital health offerings (formerly under the Withings brand; Withings S.A. was acquired by Nokia last year)
in its retail and online stores, going forward. The companies also said that they are looking to explore future partnership in the field of
digital. Notably, the companies also intend to hold regular meetings in order to serve their customers in a better way.

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 Valuation
The ‘Value’ section of the Industry Comparisons table below provides all the key valuation metrics for Nokia contrasted with its
nearest peers as well as the industry and the S&P 500 index. Please note that the Zacks Value Style Score condenses all of these
valuation metrics into one score that provides a true measure of the stock’s intrinsic value. A Value Style Score of ‘A’ (or ‘B’) is
highly desirable, particularly when accompanied with Zacks Rank #1 (Strong Buy) or Zacks Rank # 2 (Buy).

The target price of $7.25 is based on 29x the Zacks Consensus Estimate for F1 earnings

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 Industry Analysis Zacks Industry Rank: 221 / 265 (Bottom 17%) Top Peers

Juniper Networks, Inc. (JNPR)

PC-Tel, Inc. (PCTI)
ARC Group Worldwide, Inc. (ARCW)
InterDigital, Inc. (IDCC)
Ericsson (ERIC)
Comtech Telecommunications Corp. (CMTL)
Harris Corporation (HRS)
Motorola Solutions, Inc. (MSI)

Industry Comparison Wireless Equipment | Position in Industry: 1 of 17 Industry Peers

NOK X Industry S&P 500 ERIC QCOM ZTCOY

VGM Score - -
Market Cap 38.17 B 420.02 M 20.59 B 20.94 B 78.23 B 1.84 B
# of Analysts 10 6.5 14 7 21 1
Dividend Yield 2.63% 0.00% 1.82% 3.37% 2.65% 0.92%

Value Score - -
Cash/Price 35.97 13.16 9.77 7.72 -18.79 45.67
EV/EBITDA 58.15 13.66 12.74 11.56 8.97 NA
PEG Ratio 1.23 1.48 1.99 67.26 1.54 NA
Price/Book (P/B) 1.92 1.85 3.22 1.50 2.51 0.31
Price/Cash Flow (P/CF) 38.58 11.65 13.49 10.42 19.01 1.39
P/E (F1) 23.36 19.54 18.98 251.20 14.43 16.83
Price/Sales (P/S) 1.50 1.50 2.50 0.86 3.42 0.10
Earnings Yield 4.29% 3.10% 5.25% 0.47% 6.90% 5.77%
Debt/Equity 0.20 0.20 0.68 0.22 0.62 0.12
Cash Flow ($/share) 0.54 1.36 5.41 0.63 4.97 0.04

Growth Score - -
Hist. EPS Growth (3-5 yrs) 47.37% 8.31% 7.16% -92.75% -2.39% 252.63%
Proj. EPS Growth (F1/F0) 16.67% 3.58% 9.44% -91.94% -6.88% 270.59%
Curr. Cash Flow Growth 66.38% 1.54% 5.40% -43.77% -8.62% -98.20%
Hist. Cash Flow Growth (3-5 yrs) 17.74% 11.78% 6.71% -11.63% 3.12% -37.18%
Current Ratio 1.57 1.82 1.37 1.73 2.95 1.23
Debt/Capital 16.57% 17.96% 41.65% 17.96% 38.28% 10.93%
Net Margin -1.78% 1.52% 9.86% -6.40% 17.26% -1.69%
Return on Equity 7.07% 3.45% 15.93% 7.35% 18.61% -1.04%
Sales/Assets 0.55 0.77 0.54 0.77 0.35 0.74
Proj. Sales Growth (F1/F0) -2.48% 0.15% 5.19% -6.72% -2.77% 14.97%

Momentum Score - -
Daily Price Chg 0.31% -0.33% -0.10% -0.79% -0.41% -3.08%
1 Week Price Chg 5.37% 0.91% -0.00% 3.34% 3.58% -2.91%
4 Week Price Chg 6.51% 0.00% 2.17% -11.80% -3.36% 3.17%
12 Week Price Chg 6.86% 0.72% 3.07% -2.48% -3.16% 32.97%
52 Week Price Chg 18.91% 14.61% 11.66% -13.02% -13.17% 89.15%
20 Day Average Volume 12,630,425 103,432 0 6,655,015 9,821,575 1,788
(F1) EPS Est 1 week change 7.01% 0.00% 0.08% 0.00% 0.00% 0.00%
(F1) EPS Est 4 week change 22.63% 0.00% 0.32% -90.74% 0.07% 0.00%
(F1) EPS Est 12 week change 21.74% -3.33% 1.00% -91.28% -3.67% -3.33%
(Q1) EPS Est Mthly Chg 14.29% 0.00% 0.00% -70.67% -7.69% NA

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 Zacks Rank Education
The Zacks Rank is calculated from four primary inputs: Agreement, Magnitude, Upside and Surprise.

Agreement
This is the extent which brokerage analysts are revising their earnings estimates in the same
direction. The greater the percentage of estimates being revised higher, the better the score for this
component.

For example, if there were 10 estimate revisions over the last 60 days, with 8 of those revisions up,
and the other 2 down, then the agreement factor would be 80% positive. If, however, 8 were to the
downside with only 2 of them up, then the agreement factor would be 80% negative. The higher the
percentage of agreement the better.

Magnitude
This is a measure based on the size of the recent change in the current consensus estimates. The
Zacks Rank looks at the magnitude of these changes over the last 60 days.

In the chart to the right, the display shows the consensus estimate from 60-days ago, 30-days ago,
7-days ago, and the most current estimate The difference between the current estimate and the
estimate from 60-days ago is displayed as a percentage. A larger positive percentage increase will
score better on this component.

Upside
This is the difference between the most accurate estimate, as calculated by Zacks, and the
consensus estimate. For example, a stock with a consensus estimate of $1.00, and a most
accurate estimate of $1.05 will have an upside factor of 5%.

This is not an indication of how much a stock will go up or down. Instead, it's a measure of the
difference between these two estimates. This is particularly useful near earnings season as a
positive upside percentage can be used to help predict a future surprise.

Surprise
The Zacks Rank also factors in the last few quarters of earnings surprises. Companies that have
positively surprised in the recent past have a tendency of positively surprising again in the future (or
missing if they recently missed).

A stock with a recent track record of positive surprises will score better on this factor than a stock
with a history of negative surprises. These stocks will have a greater likelihood of positively
surprising again.

Zacks Style Score Education

The Zacks Style Score is as a complementary indicator to the Zacks Rank, giving investors a way to focus
on the best Zacks Rank stocks that best fit their own stock picking preferences.

Academic research has proven that stocks with the best Growth, Value, and Momentum characteristics outperform the market. The
Zacks Style Scores rate stocks on each of these individual styles and assigns a rating of A, B, C, D and F. An A, is better than a B; a B
is better than a C; and so on.

As an investor, you want to buy stocks with the highest probability of success. That means buying stocks with a Zacks Rank #1 or #2,
Strong Buy or Buy, which also has a Style Score of an A or a B.

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 Disclosures
The analysts contributing to this report do not hold any shares of this stock. The EPS and revenue forecasts are the Zacks
Consensus estimates. Additionally, the analysts contributing to this report certify that the views expressed herein accurately reflect the
analysts' personal views as to the subject securities and issuers. Zacks certifies that no part of the analysts compensation was, is, or
will be, directly or indirectly, related to the specific recommendation or views expressed by the analyst in the report. Additional
information on the securities mentioned in this report is available upon request. This report is based on data obtained from sources we
believe to be reliable, but is not guaranteed as to accuracy and does not purport to be complete. Because of individual objectives, the
report should not be construed as advice designed to meet the particular investment needs of any investor. Any opinions expressed
herein are subject to change. This report is not to be construed as an offer or the solicitation of an offer to buy or sell the securities
herein mentioned. Zacks or its officers, employees or customers may have a position long or short in the securities mentioned and buy
or sell the securities from time to time. Zacks uses the following rating system for the securities it covers which results from a
proprietary quantitative model using trends in earnings estimate revisions. This model is proven most effective for judging the timeliness
of a stock over the next 1 to 3 months. The model assigns each stock a rank from 1 through 5. Zacks Rank 1 = Strong Buy. Zacks Rank
2 = Buy. Zacks Rank 3 = Hold. Zacks Rank 4 = Sell. Zacks Rank 5 = Strong Sell. We also provide a Zacks Industry Rank for each
company which provides an idea of the near-term attractiveness of a company s industry group. We have 264 industry groups in total.
Thus, the Zacks Industry Rank is a number between 1 and 264. In terms of investment attractiveness, the higher the rank the better.
Historically, the top half of the industries has outperformed the general market.

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