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Why Is Telephone and Data Systems (TDS) Down 22.6% Since Last Earnings?
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It has been about a month since the last earnings report for Telephone and Data Systems, Inc. (TDS - Free Report) . Shares have lost about 22.6% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock’s next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Telephone & Data Systems' Fourth Quarter 2016 Earnings
GAAP net loss in the fourth quarter of 2016 was $5 million or a loss of $0.05 per share compared with a net loss of $1 million or a loss of $0.01 per share in the year-ago quarter. Quarterly loss per share of $0.05 came in line with the Zacks Consensus Estimate.
Revenues were up 0.3% year over year to $1,278 million in the reported quarter, below the Zacks Consensus Estimate of $1,351.4 million. Operating expenses were $1,294 million, up 0.7% year over year. The company reported quarterly operating loss was $29 million compared with a loss of $24 million in the year-ago quarter.
United States Cellular Division
The company’s wireless subsidiary United States Cellular reported fourth-quarter 2016 loss per share of $0.07, narrower than the Zacks Consensus Estimate of $0.08 per share.
Quarterly revenues of $991 million were up 0.4% year over year but fell short of the Zacks Consensus Estimate of $1,022.6 million. Quarterly Service revenues decreased 8% to $737 million. Revenues from Equipment sales were up a substantial 37% to $254 million.
Quarterly postpaid ARPU (average revenue per user) decreased to $45.19 from $51.46 at the end of 2015. Postpaid ARPA (average revenue per account) was $120.67 compared with $131.96 at the end of 2015. Postpaid churn rose to 1.41% from 1.31% recorded at the end of 2015. Prepaid ARPU decreased to $33.25 from $35.54 recorded at the end of 2015. Prepaid churn increased to 5.44% in the reported quarter from 5.40% at 2015-end.
United States Cellular exited 2016 with a subscriber base of 5,031,000 compared with 4,876,000 at the end of 2015. Postpaid subscriber base totaled 4,482,000 compared with 4,409,000 at 2015-end. Meanwhile, prepaid subscriber base totaled 484,000 compared with 387,000 at the end of 2015. In the reported quarter, United States Cellular lost a net of 2,000 postpaid subscribers compared with the addition of 68,000 in the year-ago quarter. The company gained 4,000 prepaid customers in the same quarter compared with 7,000 in the prior-year quarter.
TDS Division
In the reported quarter, total revenue came in at $283 million, down 0.4% year over year. Within the segment, revenues from the wireline segment came in at $174 million, flat year over year. Cable revenues were $49 million, up 13% year over year while HMS revenues decreased 10% to $61 million.
Cash Flow
In the fourth quarter of 2016, Telephone & Data Systems generated $144 million of cash from operations compared with $63 million in the prior-year quarter. Quarterly adjusted free cash flow was a negative $64 million compared with a negative $178 million in the year-earlier quarter.
Liquidity
Telephone & Data Systems exited 2016 with cash and cash equivalents of $900 million compared with $985 million at the end of 2015. At 2016 end, total debt was $2,445 million compared with $2,440 million at 2015-end. At the end of 201, the debt-to-capitalization ratio stood at 0.34 compared with 0.26 at end-2015.
Subscriber Statistics
As of Dec 31, 2016, Telephone & Data Systems had 585,400 residential wireline connections compared with 582,700 in the year-ago quarter. Of the total, voice connections were 310,600, down 2.9%. Broadband Connections were 229,500, up 0.4%. IPTV connections were 45,300, up a substantial 31.7%. Quarterly total residential revenue per connection was $44.27 compared with $41.24 in the year-ago quarter.
The company exited 2016 with 329,700 commercial wireline connections, down 3.3% year over year. Of the total, voice connections were 157,400, down 8.2%. Broadband Connections were 21,400, down 4.5%. ManagedIP connections were 150,900, up 2.6%.
Total cable connections were 292,400, up 4.3% year over year. Of the total, Video connections were 99,000, down 7.3%. Broadband Connections were 133,700, up 14.2%. Voice connections were 59,600, up 5.7%.
Guidance for 2017
For 2017, Telephone & Data Systems projects total operating revenue in the range of $1,200–$1,250 million. Both operating cash flow and adjusted EBITDA are estimated in the band of $300–$340 million while capital expenditure is projected at around $225 million.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions. However, in the past month, the consensus estimate shifted downward by 94.1%.
Telephone and Data Systems, Inc. Price and Consensus
At this time, Telephone and Data Systems' stock has a nice Growth Score of 'B', though it is lagging a bit on the momentum front with a 'C'. Charting a somewhat similar path, the stock was allocated a grade of 'B' on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'B'. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is equally suitable for value and growth investors, while momentum investors may want to look elsewhere.
Outlook
The stock has a Zacks Rank #4 (Sell). We are expecting below average return from the stock in the next few months.
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Why Is Telephone and Data Systems (TDS) Down 22.6% Since Last Earnings?
It has been about a month since the last earnings report for Telephone and Data Systems, Inc. (TDS - Free Report) . Shares have lost about 22.6% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock’s next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Telephone & Data Systems' Fourth Quarter 2016 Earnings
GAAP net loss in the fourth quarter of 2016 was $5 million or a loss of $0.05 per share compared with a net loss of $1 million or a loss of $0.01 per share in the year-ago quarter. Quarterly loss per share of $0.05 came in line with the Zacks Consensus Estimate.
Revenues were up 0.3% year over year to $1,278 million in the reported quarter, below the Zacks Consensus Estimate of $1,351.4 million. Operating expenses were $1,294 million, up 0.7% year over year. The company reported quarterly operating loss was $29 million compared with a loss of $24 million in the year-ago quarter.
United States Cellular Division
The company’s wireless subsidiary United States Cellular reported fourth-quarter 2016 loss per share of $0.07, narrower than the Zacks Consensus Estimate of $0.08 per share.
Quarterly revenues of $991 million were up 0.4% year over year but fell short of the Zacks Consensus Estimate of $1,022.6 million. Quarterly Service revenues decreased 8% to $737 million. Revenues from Equipment sales were up a substantial 37% to $254 million.
Quarterly postpaid ARPU (average revenue per user) decreased to $45.19 from $51.46 at the end of 2015. Postpaid ARPA (average revenue per account) was $120.67 compared with $131.96 at the end of 2015. Postpaid churn rose to 1.41% from 1.31% recorded at the end of 2015. Prepaid ARPU decreased to $33.25 from $35.54 recorded at the end of 2015. Prepaid churn increased to 5.44% in the reported quarter from 5.40% at 2015-end.
United States Cellular exited 2016 with a subscriber base of 5,031,000 compared with 4,876,000 at the end of 2015. Postpaid subscriber base totaled 4,482,000 compared with 4,409,000 at 2015-end. Meanwhile, prepaid subscriber base totaled 484,000 compared with 387,000 at the end of 2015. In the reported quarter, United States Cellular lost a net of 2,000 postpaid subscribers compared with the addition of 68,000 in the year-ago quarter. The company gained 4,000 prepaid customers in the same quarter compared with 7,000 in the prior-year quarter.
TDS Division
In the reported quarter, total revenue came in at $283 million, down 0.4% year over year. Within the segment, revenues from the wireline segment came in at $174 million, flat year over year. Cable revenues were $49 million, up 13% year over year while HMS revenues decreased 10% to $61 million.
Cash Flow
In the fourth quarter of 2016, Telephone & Data Systems generated $144 million of cash from operations compared with $63 million in the prior-year quarter. Quarterly adjusted free cash flow was a negative $64 million compared with a negative $178 million in the year-earlier quarter.
Liquidity
Telephone & Data Systems exited 2016 with cash and cash equivalents of $900 million compared with $985 million at the end of 2015. At 2016 end, total debt was $2,445 million compared with $2,440 million at 2015-end. At the end of 201, the debt-to-capitalization ratio stood at 0.34 compared with 0.26 at end-2015.
Subscriber Statistics
As of Dec 31, 2016, Telephone & Data Systems had 585,400 residential wireline connections compared with 582,700 in the year-ago quarter. Of the total, voice connections were 310,600, down 2.9%. Broadband Connections were 229,500, up 0.4%. IPTV connections were 45,300, up a substantial 31.7%. Quarterly total residential revenue per connection was $44.27 compared with $41.24 in the year-ago quarter.
The company exited 2016 with 329,700 commercial wireline connections, down 3.3% year over year. Of the total, voice connections were 157,400, down 8.2%. Broadband Connections were 21,400, down 4.5%. ManagedIP connections were 150,900, up 2.6%.
Total cable connections were 292,400, up 4.3% year over year. Of the total, Video connections were 99,000, down 7.3%. Broadband Connections were 133,700, up 14.2%. Voice connections were 59,600, up 5.7%.
Guidance for 2017
For 2017, Telephone & Data Systems projects total operating revenue in the range of $1,200–$1,250 million. Both operating cash flow and adjusted EBITDA are estimated in the band of $300–$340 million while capital expenditure is projected at around $225 million.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions. However, in the past month, the consensus estimate shifted downward by 94.1%.
Telephone and Data Systems, Inc. Price and Consensus
Telephone and Data Systems, Inc. Price and Consensus | Telephone and Data Systems, Inc. Quote
VGM Scores
At this time, Telephone and Data Systems' stock has a nice Growth Score of 'B', though it is lagging a bit on the momentum front with a 'C'. Charting a somewhat similar path, the stock was allocated a grade of 'B' on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'B'. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is equally suitable for value and growth investors, while momentum investors may want to look elsewhere.
Outlook
The stock has a Zacks Rank #4 (Sell). We are expecting below average return from the stock in the next few months.