Ericsson Stock Sinks on Warning US Tariffs Would Significantly Hurt Business

American depositary receipts (ADRs) of Ericsson (ERIC) sank 11% Friday when the telecom equipment maker missed profit estimates and warned that potential tariffs from the Trump administration could seriously impact its future results.

The company explained in its fourth-quarter earnings report that “the incoming U.S. administration has indicated that it intends to impose a broad range of tariffs on imports to the U.S., which could have significant negative impacts throughout the information and telecommunications industry, including the Company’s international product development and global value and supply chains.”

Ericsson also said that along with the U.S., it faces “uncertainties for the future bilateral trading relationship between China and a number of countries,” including Sweden. 

The company posted fourth-quarter earnings per share (EPS) of 1.44 Swedish kronor ($0.13), well below the SEK2.07 ($0.19) expected by analysts surveyed by Visible Alpha. Revenue rose 1% year-over-year to SEK72.91 billion ($6.68 billion), mostly in line with forecasts.

Sales Surge in North America, Slump in Asia

North America sales soared 53% to SEK22.0 billion on contract wins, increased network investments by some large customers, strong year-end software demand, and timing of project deliverables. Sales were up 1% in Europe and Latin America, but they slumped in Southeast Asia, Oceania, and India (-28%), Northeast Asia (-22%), and Middle East and Africa (-19%).

Expenses increased SEK13.9 billion for Research and Development (R&D) and SEK10.5 billion for Selling & Administrative. 

Despite today’s drop, Ericsson ADRs are up about 40% in the last year.