Nokia (NOK) Stock Higher After Reaching Smartphone Patent License Agreement With LG

NEW YORK (TheStreet) -- Shares of Nokia (NOK) were gaining 2% to $7.15 Tuesday after the Finnish telecommunications company announced it reached a smartphone patent license agreement with LG.

The details of the royalty payment obligations are subject to commercial arbitration which is expected to conclude within one to two years, according to the companies. The other terms of the agreement will remain confidential.

South Korean smartphone maker LG is the first major smartphone manufacturer to join Nokia's licensing program since Nokia sold its Devices & Services division, which was in charge of designing and making the company's handsets, to Microsoft (MSFT) in 2014.

About 5.7 million shares of Nokia were traded by 1:24 p.m. Tuesday, compared to the company's average trading volume of about 28 million shares a day.

TheStreet Ratings team rates NOKIA CORP as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

"We rate NOKIA CORP (NOK) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, notable return on equity, reasonable valuation levels, compelling growth in net income and impressive record of earnings per share growth. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Communications Equipment industry. The net income increased by 157.7% when compared to the same quarter one year prior, rising from -$329.27 million to $190.12 million.
  • The current debt-to-equity ratio, 0.31, is low and is below the industry average, implying that there has been successful management of debt levels. To add to this, NOK has a quick ratio of 1.51, which demonstrates the ability of the company to cover short-term liquidity needs.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Communications Equipment industry and the overall market, NOKIA CORP's return on equity exceeds that of both the industry average and the S&P 500.
  • NOKIA CORP has improved earnings per share by 25.0% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, NOKIA CORP increased its bottom line by earning $0.37 versus $0.06 in the prior year. For the next year, the market is expecting a contraction of 13.5% in earnings ($0.32 versus $0.37).
  • You can view the full analysis from the report here: NOK Ratings Report

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