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Analyst Blog

Telephone & Data Systems Inc. (TDS - Analyst Report) is slated to report its first-quarter 2014 results on May 2, before the market opens. The company, which owns the majority of U.S. Cellular, has failed to beat the Zacks Consensus Estimate in the past four quarters.

Earnings Whispers

Our proven model does not conclusively show that TDS is likely to beat earnings because it does not have the right combination of two key ingredients of a positive surprise prediction and Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold).

Zacks ESP: Earnings ESP which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at 0.00% for TDS.

Zacks Rank: TDS currently has a Zacks Rank #3. However, the combination of TDS’s Zacks Rank #3 and +0.00% ESP makes surprise prediction difficult.

Factors Influencing Results This Quarter

Within the wireless the company has been facing higher churn, particularly in the post-paid segment owing to an intensely competitive environment. Further, the company remains vulnerable to aggressive pricing by larger rivals as these have greater financial, technical, marketing and distribution resources. Higher smartphone subsidies continue to affect its margins.

The company’s wireline segment also faces stiff competition from incumbent local exchange carriers and continues to experience reduction in access line customers due to wireless substitution and other alternative services. The carrier’s high margin roaming business also remains challenged owing to lower voice usage and weak voice and data ARPU. We thus caution investors against the stock going into the earnings announcement.

Other Stocks to Consider

Here are some other companies to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Level 3 Communications Inc. (LVLT - Snapshot Report) with earnings ESP of +10.71% and Zacks Rank #1.

BCE Inc. (BCE - Analyst Report) with earnings ESP of +1.47% and Zacks Rank #3.

America Movil S.A.B de CV Inc. (AMX - Analyst Report) with earnings ESP of +31.71% and Zacks Rank #3.

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