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Telephone and Data Systems' (TDS) Q2 Loss Wider Than Expected
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Telephone and Data Systems, Inc. (TDS - Free Report) reported weak second-quarter 2023 results, with the top and the bottom line missing the respective Zacks Consensus Estimate. The company reported lower revenues year over year due to declining trends in U.S. Cellular vertical. However, growth in residential connection and healthy momentum in fixed wireless partially reversed this negative trend.
Net Income
The company reported a net loss of $19 million or a loss of 17 cents per share against a net income of $18 million or 15 cents per share in the year-earlier quarter. Lower net sales year over year impacted the net income. The bottom line fell short of Zacks Consensus Estimate by 13 cents.
Telephone and Data Systems, Inc. Price, Consensus and EPS Surprise
Net sales in the June quarter were $1,267 million, down from $1,349 million reported in the year-ago quarter. The top line missed the Zacks Consensus Estimate by $42 million. A decline in revenues in the U.S. Cellular segment impeded the top line.
Revenues from U.S. Cellular were $957 million, down 7% year over year. Despite growth in fixed wireless and tower revenues, a reduction in postpaid retail and prepaid connections hurt the top line. Net sales fell short of our revenue estimate of $1,003.3 million.
Total operating expenses stood at $923 million, down from $987 million in the prior-year quarter. Operating income declined to $34 million from $40 million in the year-ago quarter. Postpaid average revenues per user (ARPU) rose to $50.64 from $50.07. Postpaid average revenues per account decreased to $130.19 from $130.43 in the year-ago quarter. Prepaid ARPU was $33.86, down from $35.25 in the prior-year quarter.
TDS Telecom contributed $257 million to revenues compared with $256 million reported in the prior-year quarter. The top line fell short of our revenue estimate of $259.8 million. Residential broadband connection recorded 5% year-over-year growth. Residential revenues per connection were $61.97, up 4% year over year from $59.67 in the prior-year quarter. Around 13% of customers opted for 1 Gigabit+ speed compared with the previous-year quarter’s tally of 9%. About 53% of the users have chosen 100 Mbps or higher speed, up from 51% in the year-earlier quarter.
Total operating expenses in TDS Telecom rose 5% year over year to $189 million. Total connections stood at 1,167,400 compared with 1,187,200 in the year-ago quarter. Operating income declined to $7 million from $23 million.
Other Details
Total operating expenses stood at $1,234 million, down 4% from the prior-year quarter’s levels. Operating income was $33 million compared with $63 million in the year-ago period. Adjusted EBITDA in TDS Telecom came at $70 million, down 9% year over year due to higher cash expenses. Adjusted EBITDA for U.S. Cellular witnessed a decline of 8% to $239 million compared with the prior-year quarter’s figure of $261 million.
Cash Flow & Liquidity
In the second quarter of 2023, Telephone and Data Systems generated $469 million of net cash from operating activities compared with $352 million in the prior-year quarter. As of Jun 30, 2023, the company had $251 million in cash and cash equivalents, with $3,872 million of long-term debt. It reported free cash flow of $159 million compared with $96 million in the prior-year quarter.
Outlook
For 2023, management expects total operating revenues at TDS Telecom in the range of $1,030-$1,060 million. Guidance for adjusted EBITDA (non-GAAP) has been raised to $270-300 million from $260-$290 million estimated previously. Adjusted OIBDA (non-GAAP) is expected to be $270-300 million, up from the previous estimation of $260-$290 million. Capital expenditures are expected in the range of $475-525 million, down from $500-$550 million.
Service revenues for U.S. Cellular are expected to be $3,025-3,075 million, down from the previously estimated range of $3,050-$3150 million. The company raised the lower range of adjusted EBITDA to $925-$1025 million from $875-$1,025 million estimated previously. Management expects capital expenditures in the band of $600-700 million. Adjusted OIBDA is estimated within the range of $750-850 million compared with $725-$875 million expected previously.
The company is increasingly focusing on fiber expansion and remains committed to achieving its target of 1.2 million marketable fiber service addresses by 2026. It is also planning to offer 1 gig or greater speed to at least 80% of users by 2026.
Zacks Rank & Stocks to Consider
Telephone and Data Systems currently carries a Zacks Rank #3 (Hold).
It is a pioneer in advanced mobile technologies that enable wireless communications and capabilities. The company engages in designing and developing a wide range of advanced technology solutions, which are used in digital cellular and wireless 3G, 4G and IEEE 802-related products and networks.
Workday Inc. (WDAY - Free Report) , sporting a Zacks Rank #1, delivered an earnings surprise of 13.05%, on average, in the trailing four quarters. In the last reported quarter, it pulled off an earnings surprise of 18.02%.
Workday is a provider of enterprise-level software solutions for financial management and human resource domains. The company’s cloud-based platform combines finance and HR in a single system that makes it easier for organizations to provide analytical insights and decision support.
Meta Platforms Inc. (META - Free Report) , carrying a Zacks Rank #2, delivered an earnings surprise of 18.99%, on average, in the trailing four quarters. Meta is the world’s largest social media platform. The company’s portfolio offering evolved from a single Facebook app to multiple apps like the photo and video-sharing app, Instagram, and the WhatsApp messaging app, owing to acquisitions.
Meta is considered to have pioneered the concept of social networking, which is why it enjoys a first-mover advantage in this market. As developed regions mature, Meta undertakes measures to drive penetration in emerging markets of South East Asia, Latin America and Africa.
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Telephone and Data Systems' (TDS) Q2 Loss Wider Than Expected
Telephone and Data Systems, Inc. (TDS - Free Report) reported weak second-quarter 2023 results, with the top and the bottom line missing the respective Zacks Consensus Estimate. The company reported lower revenues year over year due to declining trends in U.S. Cellular vertical. However, growth in residential connection and healthy momentum in fixed wireless partially reversed this negative trend.
Net Income
The company reported a net loss of $19 million or a loss of 17 cents per share against a net income of $18 million or 15 cents per share in the year-earlier quarter. Lower net sales year over year impacted the net income. The bottom line fell short of Zacks Consensus Estimate by 13 cents.
Telephone and Data Systems, Inc. Price, Consensus and EPS Surprise
Telephone and Data Systems, Inc. price-consensus-eps-surprise-chart | Telephone and Data Systems, Inc. Quote
Revenues
Net sales in the June quarter were $1,267 million, down from $1,349 million reported in the year-ago quarter. The top line missed the Zacks Consensus Estimate by $42 million. A decline in revenues in the U.S. Cellular segment impeded the top line.
Revenues from U.S. Cellular were $957 million, down 7% year over year. Despite growth in fixed wireless and tower revenues, a reduction in postpaid retail and prepaid connections hurt the top line. Net sales fell short of our revenue estimate of $1,003.3 million.
Total operating expenses stood at $923 million, down from $987 million in the prior-year quarter. Operating income declined to $34 million from $40 million in the year-ago quarter. Postpaid average revenues per user (ARPU) rose to $50.64 from $50.07. Postpaid average revenues per account decreased to $130.19 from $130.43 in the year-ago quarter. Prepaid ARPU was $33.86, down from $35.25 in the prior-year quarter.
TDS Telecom contributed $257 million to revenues compared with $256 million reported in the prior-year quarter. The top line fell short of our revenue estimate of $259.8 million. Residential broadband connection recorded 5% year-over-year growth. Residential revenues per connection were $61.97, up 4% year over year from $59.67 in the prior-year quarter. Around 13% of customers opted for 1 Gigabit+ speed compared with the previous-year quarter’s tally of 9%. About 53% of the users have chosen 100 Mbps or higher speed, up from 51% in the year-earlier quarter.
Total operating expenses in TDS Telecom rose 5% year over year to $189 million. Total connections stood at 1,167,400 compared with 1,187,200 in the year-ago quarter. Operating income declined to $7 million from $23 million.
Other Details
Total operating expenses stood at $1,234 million, down 4% from the prior-year quarter’s levels. Operating income was $33 million compared with $63 million in the year-ago period. Adjusted EBITDA in TDS Telecom came at $70 million, down 9% year over year due to higher cash expenses. Adjusted EBITDA for U.S. Cellular witnessed a decline of 8% to $239 million compared with the prior-year quarter’s figure of $261 million.
Cash Flow & Liquidity
In the second quarter of 2023, Telephone and Data Systems generated $469 million of net cash from operating activities compared with $352 million in the prior-year quarter. As of Jun 30, 2023, the company had $251 million in cash and cash equivalents, with $3,872 million of long-term debt. It reported free cash flow of $159 million compared with $96 million in the prior-year quarter.
Outlook
For 2023, management expects total operating revenues at TDS Telecom in the range of $1,030-$1,060 million. Guidance for adjusted EBITDA (non-GAAP) has been raised to $270-300 million from $260-$290 million estimated previously. Adjusted OIBDA (non-GAAP) is expected to be $270-300 million, up from the previous estimation of $260-$290 million. Capital expenditures are expected in the range of $475-525 million, down from $500-$550 million.
Service revenues for U.S. Cellular are expected to be $3,025-3,075 million, down from the previously estimated range of $3,050-$3150 million. The company raised the lower range of adjusted EBITDA to $925-$1025 million from $875-$1,025 million estimated previously. Management expects capital expenditures in the band of $600-700 million. Adjusted OIBDA is estimated within the range of $750-850 million compared with $725-$875 million expected previously.
The company is increasingly focusing on fiber expansion and remains committed to achieving its target of 1.2 million marketable fiber service addresses by 2026. It is also planning to offer 1 gig or greater speed to at least 80% of users by 2026.
Zacks Rank & Stocks to Consider
Telephone and Data Systems currently carries a Zacks Rank #3 (Hold).
InterDigital, Inc. (IDCC - Free Report) , carrying a Zacks Rank #2 (Buy), delivered an earnings surprise of 168.01%, on average, in the trailing four quarters. In the last reported quarter, it pulled off an earnings surprise of 7.44%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
It is a pioneer in advanced mobile technologies that enable wireless communications and capabilities. The company engages in designing and developing a wide range of advanced technology solutions, which are used in digital cellular and wireless 3G, 4G and IEEE 802-related products and networks.
Workday Inc. (WDAY - Free Report) , sporting a Zacks Rank #1, delivered an earnings surprise of 13.05%, on average, in the trailing four quarters. In the last reported quarter, it pulled off an earnings surprise of 18.02%.
Workday is a provider of enterprise-level software solutions for financial management and human resource domains. The company’s cloud-based platform combines finance and HR in a single system that makes it easier for organizations to provide analytical insights and decision support.
Meta Platforms Inc. (META - Free Report) , carrying a Zacks Rank #2, delivered an earnings surprise of 18.99%, on average, in the trailing four quarters. Meta is the world’s largest social media platform. The company’s portfolio offering evolved from a single Facebook app to multiple apps like the photo and video-sharing app, Instagram, and the WhatsApp messaging app, owing to acquisitions.
Meta is considered to have pioneered the concept of social networking, which is why it enjoys a first-mover advantage in this market. As developed regions mature, Meta undertakes measures to drive penetration in emerging markets of South East Asia, Latin America and Africa.