President Donald Trump’s aggressive trade policies are shaking up the telecommunications sector, and Ericsson (ERIC) is feeling the heat. The Swedish telecom giant’s stock took a hit, down 14% on Friday, after the company warned that proposed tariffs could seriously disrupt its business and reshape the industry.
The company’s concerns stem directly from the Trump administration’s explicit plans to impose broad tariffs on imports, which would significantly disrupt the telecommunications industry’s global supply chains. This development is particularly critical for Ericsson as it faces a complex web of trade challenges – not only with the U.S., but also uncertainties in bilateral trading relationships between China and several countries, including Sweden.
CFO Lars Sandström acknowledged the gravity of the situation, noting that while Ericsson maintains production facilities across multiple regions, including the U.S., the potential tariff impact remains a serious concern for 2025.
Let’s break down Ericsson’s financials and fundamentals to see if this dividend stock is still worth considering for investors.
Decoding ERIC’s Financial Health
Ericsson (ERIC) is a global leader in telecommunications infrastructure. Even with these tariff-related challenges, the company is staying committed to its shareholders, paying a dividend of $0.26 per share, offering a current yield of 3.42%.
The company’s Q4 2024 earnings, released on Jan. 24, 2025, are a mixed bag. Sales grew by 2% year-over-year to 72.9 billion Swedish krona, with North America standing out as a bright spot — sales there jumped by an impressive 54%. However, this strong regional performance hasn’t been enough to shield the stock from recent struggles.
Shares are currently trading down 3% over the past month. That said, the stock still boasts a solid 52-week gain of 34.5%.
Operationally, Ericsson has made strides in efficiency. Adjusted gross margins improved to 46.3%, up from 41.1%, thanks to better supply chain management and tighter cost controls. This led to an adjusted EBITA of 10.2 billion Swedish krona, reflecting a 14.1% margin. Net income for the quarter came in at 4.9 billion Swedish krona (up 43% year over year), with diluted earnings per share of 1.44 Krona — a solid performance but one that could face challenges if tariffs are imposed.
From a valuation standpoint, Ericsson looks appealing, trading at a forward price-earnings ratio of 17.91x — below the sector median of 26.22x. The company also reported free cash flow of 15.8 billion Swedish krona, up 27% year over year. Still, the looming threat of tariffs could disrupt this momentum and put pressure on its ability to sustain dividends and operations moving forward.
Growth at a Crossroads
Ericsson is pushing ahead with innovation and partnerships, even as tariff concerns loom large. CTO Erik Ekudden remains hopeful about opportunities in the U.S. market under Trump’s administration, emphasizing Ericsson’s leadership in OpenRAN technology. This open architecture allows telecom operators to mix and match suppliers, breaking away from traditional systems and fostering flexibility in network design.
Ericsson’s subsidiary Vonage recently achieved SOC 2 Type II compliance for its Network APIs, making it one of the first providers to earn this important security certification. This milestone strengthens Vonage’s ability to offer secure and efficient API solutions, helping businesses streamline processes and prevent fraud. Meanwhile, Ericsson’s new venture, Aduna, led by CEO Anthony Bartolo, aims to accelerate global API adoption by working closely with major telecom operators.
Ericsson is also making progress in next-generation technologies. The company recently completed 6G synaesthesia integration tests with China’s IMT-2030 Promotion Group, showcasing its commitment to future networks. These tests explored advanced multi-station perception methods that could play a key role in 6G systems.
On the 5G front, Ericsson partnered with Orange Belgium to successfully automate 5G slicing, enabling faster and more tailored connectivity for enterprises.
These advancements highlight Ericsson’s focus on both immediate and long-term growth.
What Wall Street Thinks About Ericsson Stock
For the current quarter, analysts are predicting earnings per share of $0.10, up over 40% from the prior-year period. Revenue, on the other hand, is only projected to grow 4.7% year over year.
Wall Street’s overall sentiment toward Ericsson has turned more skeptical. Among 10 analysts, the consensus leans toward a “Moderate Sell” rating, with five recommending a “Hold,” one recommending a “Moderate Sell,” and four rating it “Strong Sell.”
This cautious outlook is also evident in its price target. The average target sits at $6.30, which implies potential downside of 17.3% from its current trading price.
Conclusion
The verdict on Ericsson as a dividend stock right now? Proceed with caution. Despite its over-3% yield and strong North American performance, the warning signs are flashing. Between potential Trump tariffs and a bearish Wall Street outlook, the risks outweigh the rewards. Until there is clarity on the tariff situation and signs of broader market recovery, dividend investors might be better off watching this one from the sidelines.
