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Can U.S. Cellular (USM) Spring a Surprise in Q3 Earnings?
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United States Cellular Corp. (USM - Free Report) , a leading regional wireless service provider, is slated to report third-quarter 2016 results on Nov 4, before the opening bell.
Last quarter, the company posted a positive earnings surprise of 88.24%. Moreover, the company’s earnings surpassed the Zacks Consensus Estimate in three of the previous four quarters, with an average beat of a stellar 1481.77%.
Let’s see how things are shaping up for this announcement.
Factors at Play
We expect U.S. Cellular to accelerate subscriber growth and arrest churn through strategic moves such as introduction of a new billing system, continuous rollout of 4G LTE, enhancement of LTE handsets, completion of various spectrum transactions, construction of cell sites and monetization of non-strategic assets. The company is also striving to gain customers from rivals through online promotional plans and offering discounts. Moreover, the recent launch of Shared Connect plans which offer more data, larger allotments and new tools to track data usage coupled with unlimited offerings in relation to calling and texting should help it sustain in the wireless market. Management is optimistic about the growing demand for smartphones to support growth in data revenues.
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, aggressive pricing by larger rivals and the ongoing consolidation in the wireless industry through mergers, acquisitions and joint ventures are near-term risks.
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 23 cents. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.
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.
Microsoft Corporation (MSFT - Free Report) , with an earnings ESP of +1.30% and a Zacks Rank #3.The company’s earnings surpassed the Zacks Consensus Estimate in three of the previous four quarters.
Sprint Corp. (S - Free Report) , with an earnings ESP of +14.29% and a Zacks Rank #3.The company’s earnings surpassed the Zacks Consensus Estimate in three of the previous four quarters.
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Can U.S. Cellular (USM) Spring a Surprise in Q3 Earnings?
United States Cellular Corp. (USM - Free Report) , a leading regional wireless service provider, is slated to report third-quarter 2016 results on Nov 4, before the opening bell.
Last quarter, the company posted a positive earnings surprise of 88.24%. Moreover, the company’s earnings surpassed the Zacks Consensus Estimate in three of the previous four quarters, with an average beat of a stellar 1481.77%.
Let’s see how things are shaping up for this announcement.
Factors at Play
We expect U.S. Cellular to accelerate subscriber growth and arrest churn through strategic moves such as introduction of a new billing system, continuous rollout of 4G LTE, enhancement of LTE handsets, completion of various spectrum transactions, construction of cell sites and monetization of non-strategic assets. The company is also striving to gain customers from rivals through online promotional plans and offering discounts. Moreover, the recent launch of Shared Connect plans which offer more data, larger allotments and new tools to track data usage coupled with unlimited offerings in relation to calling and texting should help it sustain in the wireless market. Management is optimistic about the growing demand for smartphones to support growth in data revenues.
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, aggressive pricing by larger rivals and the ongoing consolidation in the wireless industry through mergers, acquisitions and joint ventures are near-term risks.
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 23 cents. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.
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.
US CELLULAR Price and EPS Surprise
US CELLULAR Price and EPS Surprise | US CELLULAR Quote
Stocks to Consider
Here are some companies that have the right combination of elements to post an earnings beat this quarter.
Verizon Communications Inc. (VZ - Free Report) , with an earnings ESP of +1.11% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here. The company’s earnings beat the Zacks Consensus Estimate in three of the previous four quarters.
Microsoft Corporation (MSFT - Free Report) , with an earnings ESP of +1.30% and a Zacks Rank #3.The company’s earnings surpassed the Zacks Consensus Estimate in three of the previous four quarters.
Sprint Corp. (S - Free Report) , with an earnings ESP of +14.29% and a Zacks Rank #3.The company’s earnings surpassed the Zacks Consensus Estimate in three of the previous four quarters.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>