Ericsson’s earnings rise on strong sales of 5G equipment

Ericsson beat fourth quarter core earnings forecasts on Friday, helped by strong sales of 5G equipment and the ban on rival Huawei in several countries.

Not only is Ericsson is selling more, but it is also earning more from each sale, with gross margins rising to 40.6 percent in the quarter from 36.8 percent a year earlier. Margins are now at levels of a decade ago, having recovered from the low-20 percent in 2017.

In particular, the core Networks business saw margins at 43.5 percent from 41.1 percent a year earlier, on a 20 percent rise in sales.

“The competition in our industry is always cut-throat and the trick is to be ahead of the cost curve,” Chief Financial Officer Carl Mellander said.

“A lot of the money we invest in R&D not only goes into making better functionality and features, but also to reduce the cost structure.”

The company said its operating margin of 12.5 percent in 2020 reached the 2022 group target range of 12-14 percent two years early.

The company’s quarterly adjusted operating earnings rose to 11 billion Swedish crowns ($1.3 billion) from 6.5 billion crowns a year earlier, beating analysts’ mean forecast of 8.58 billion crowns, according to Refinitiv estimates.

Total revenue rose 5 percent to 69.6 billion crowns, beating estimates of 68.35 billion crowns.