Shares of LM Ericsson Telephone (ERIC) soared 12.36% in Tuesday's pre-market trading following the release of its third-quarter earnings report that significantly exceeded analyst expectations. The Swedish telecommunications equipment maker demonstrated strong financial performance, driven by operational excellence, cost-saving measures, and a major business divestiture.

Ericsson reported adjusted earnings of $0.35 per share for the quarter, more than doubling the analyst consensus estimate of $0.14 and marking a substantial 218.18% increase from $0.11 per share in the same period last year. The company's quarterly sales reached $5.910 billion, slightly beating the analyst estimate of $5.900 billion, despite a marginal 0.36% year-over-year decline.

The impressive results were largely attributed to improved operational efficiency and cost-saving measures, which boosted the company's adjusted gross margin to 48.1% from 46.3% in the previous year. Additionally, Ericsson's adjusted EBITA more than doubled to 15.8 billion Swedish kronor (approximately $1.67 billion), benefiting from a 7.6 billion kronor capital gain from the sale of its Iconectiv business. This strategic move significantly enhanced the company's EBITA margin, which soared to 27.6%. CEO Börje Ekholm highlighted that the combination of stable recurring cash flow and proceeds from the Iconectiv divestiture has strengthened the company's financial position, potentially paving the way for increased shareholder returns. This hint at improved shareholder value likely contributed to the stock's substantial rise in pre-market trading.