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Can U.S. Cellular (USM) Spring a Surprise in Q2 Earnings?
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United States Cellular Corp. (USM - Free Report) , a leading regional wireless service provider, is slated to report second-quarter 2016 results on Aug 5, before the opening bell.
Last quarter, the company posted a negative earnings surprise of 56.52%. However, the company’s earnings surpassed the Zacks Consensus Estimate in three of the previous four quarters, with an average beat of 1530.54%. Let’s see how things are shaping up for this announcement.
U.S. Cellular has planned its strategic movies to accelerate subscriber addition and arrest churn. These strategies include the introduction of a new billing system, continuous rollout of 4G LTE, enhancement of LTE handsets and the completion of various spectrum transactions. The company continued to enhance its spectrum holdings and monetize non-strategic assets to focus on long-term opportunities and construct new cell sites. Management is optimistic about the growing demand for smartphones to support growth in data revenues.
Recently, U.S. Cellular announced plans to launch an online store for the presale of the new Samsung Galaxy Note7 from Aug 4, ahead of its market release on Aug 19. The company is also offering a 50% discount on smartphones for new activations with Shared Connect plans.
On the flip side, U.S. Cellular operates in a highly competitive wireless market and is significantly challenged by low-cost mobile service plans from competitors. Additionally, high costs associated with network integration and construction of cell sites may dent margins going forward. Also, the company is highly susceptible to aggressive pricing by larger rivals. The ongoing consolidation in the wireless industry through mergers, acquisitions and joint ventures is also intensifying competition.
Earnings Whispers
Our proven model does not conclusively show that U.S. Cellular is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here as elaborated below.
Zacks ESP: U.S. Cellular has an earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 17 cents.
Zacks Rank: U.S. Cellular has a Zacks Rank #3 which increases the predictive power of ESP. However, the company’s 0.00% ESP makes surprise prediction difficult.
Meanwhile, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Stocks to Consider
Here are some companies that you may consider instead as our model shows that they have the right combination of elements to post an earnings beat this quarter.
MKS Instruments Inc. (MKSI - Free Report) , with an earnings ESP of +2.60% and a Zacks Rank #1.
CenturyLink Inc. , with an earnings ESP of +5.09% and a Zacks Rank #2.
Sprint Corp. (S - Free Report) , with an earnings ESP of +14.29% and a Zacks Rank #3.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
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Can U.S. Cellular (USM) Spring a Surprise in Q2 Earnings?
United States Cellular Corp. (USM - Free Report) , a leading regional wireless service provider, is slated to report second-quarter 2016 results on Aug 5, before the opening bell.
Last quarter, the company posted a negative earnings surprise of 56.52%. However, the company’s earnings surpassed the Zacks Consensus Estimate in three of the previous four quarters, with an average beat of 1530.54%. Let’s see how things are shaping up for this announcement.
US CELLULAR Price and EPS Surprise
US CELLULAR Price and EPS Surprise | US CELLULAR Quote
Factors at Play
U.S. Cellular has planned its strategic movies to accelerate subscriber addition and arrest churn. These strategies include the introduction of a new billing system, continuous rollout of 4G LTE, enhancement of LTE handsets and the completion of various spectrum transactions. The company continued to enhance its spectrum holdings and monetize non-strategic assets to focus on long-term opportunities and construct new cell sites. Management is optimistic about the growing demand for smartphones to support growth in data revenues.
Recently, U.S. Cellular announced plans to launch an online store for the presale of the new Samsung Galaxy Note7 from Aug 4, ahead of its market release on Aug 19. The company is also offering a 50% discount on smartphones for new activations with Shared Connect plans.
On the flip side, U.S. Cellular operates in a highly competitive wireless market and is significantly challenged by low-cost mobile service plans from competitors. Additionally, high costs associated with network integration and construction of cell sites may dent margins going forward. Also, the company is highly susceptible to aggressive pricing by larger rivals. The ongoing consolidation in the wireless industry through mergers, acquisitions and joint ventures is also intensifying competition.
Earnings Whispers
Our proven model does not conclusively show that U.S. Cellular is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here as elaborated below.
Zacks ESP: U.S. Cellular has an earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 17 cents.
Zacks Rank: U.S. Cellular has a Zacks Rank #3 which increases the predictive power of ESP. However, the company’s 0.00% ESP makes surprise prediction difficult.
Meanwhile, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Stocks to Consider
Here are some companies that you may consider instead as our model shows that they have the right combination of elements to post an earnings beat this quarter.
MKS Instruments Inc. (MKSI - Free Report) , with an earnings ESP of +2.60% and a Zacks Rank #1.
CenturyLink Inc. , with an earnings ESP of +5.09% and a Zacks Rank #2.
Sprint Corp. (S - Free Report) , with an earnings ESP of +14.29% and a Zacks Rank #3.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>