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Why Is Telephone and Data Systems (TDS) Up 5% Since the Last Earnings Report?
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More than a month has gone by since the last earnings report for Telephone and Data Systems, Inc. (TDS - Free Report) . Shares have added about 5% in that time frame, underperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Telephone & Data Systems Q3 Earnings and Revenues Lag
Telephone & Data Systems reported disappointing financial results in the third quarter of 2017, wherein both the top and the bottom line missed the Zacks Consensus Estimate.
GAAP net loss in the reported quarter was $181 million or a loss of $1.64 per share against net income of $13 million or 12 cents per share in the year-ago quarter. Quarterly adjusted earnings per share of 8 cents were well below the Zacks Consensus Estimate of 17 cents.
Revenues declined 5% year over year to $1,251 million in the reported quarter, underperforming the Zacks Consensus Estimate of $1,275 million. Operating expenses were $1,483 million, reflecting an increase of 16% year over year. The company reported quarterly operating loss of $360 million against an operating income of $22 million in the year-ago quarter.
United States Cellular Division
GAAP net loss of United States Cellular Corp. came in at $299 million or a loss of $3.51 per share against net income of $17 million or 20 cents per share in the year-ago quarter. However, quarterly adjusted earnings per share of 11 cents were well above the Zacks Consensus Estimate of a penny per share.
Quarterly total revenues of $963 million declined 6% year over year. Also, it missed the Zacks Consensus Estimate of $976.5 million. Quarterly Service revenues decreased 6% to $737 million. Revenues from Equipment sales decreased 5% to $226 million.
Quarterly postpaid ARPU (average revenue per user) decreased to $43.41 from $45.19 at the end of 2016. Postpaid ARPA (average revenue per account) was $116.36 compared with $120.67 at the end of 2016. Postpaid churn declined to 1.16% from 1.41% registered at the end of 2016. Prepaid ARPU decreased to $33.12 from $33.25 registered at the end of 2016. Prepaid churn decreased to 4.75% in the reported quarter from 5.44% at 2016-end.
United States Cellular exited the third quarter of 2017 with a subscriber base of 5,089,000 compared with 5,031,000 at the end of 2016. Postpaid subscriber base totaled 4,513,000 compared with 4,482,000 at the end of 2016. Prepaid subscriber base totaled 515,000, compared with 484,000 at the end of 2016. In the reported quarter, United States Cellular gained a net of 35,000 postpaid subscribers compared with a net loss of 6,000 customers in the year-ago quarter. The company gained 31,000 prepaid customers in the same quarter compared with 67,000 users in the prior-year quarter.
TDS Division
In the reported quarter, total revenues came in at $285 million, reflecting a decline of 1% year over year. Within the segment, revenues from the wireline segment came in at $179 million, up 2% year over year. Cable revenues were $52 million, reflecting an increase of 12% year over year while HMS revenues decreased 18% to $56 million.
Cash Flow
In the third quarter of 2017, Telephone & Data Systems generated $263 million of cash from operations compared with $238 million in the prior-year quarter. Quarterly free cash flow was $107 million compared with $93 million in the year-earlier quarter.
Liquidity
Telephone & Data Systems exited the third quarter of 2017 with cash and short-term investment of $884 million compared with $900 million at the end of 2016. Total debt was $2,463 million compared with $2,445 million at the end of 2016. At the end of the third quarter of 2017, the debt-to-capitalization ratio was 0.35 compared with 0.34 at the end of 2016.
Subscriber Statistics
At the end of the third quarter of 2017, Telephone & Data Systems had 575,300 residential wireline connections compared with 590,900 in the year-ago quarter. Of the total, voice connections were 298,200, decreasing 5.2% year over year. Broadband Connections were 229,900, down 0.9% year over year. IPTV connections were 47,200, up 8.3% year over year. Quarterly total residential revenues per connection were $46.07 compared with $44.25 in the year-ago quarter.
The company exited the third quarter of 2017 with 315,300 commercial wireline connections, down 5.6% year over year. Of the total, voice connections were 146,900, down 8.7% year over year. Broadband Connections were 20,900, declining 3.7% year over year. ManagedIP connections were 147,600, down 2.6% year over year.
Total cable connections were 300,600, up 3.3% year over year. Of the total, Broadband Connections were 143,800, up 10.4% year over year. Video connections were 97,900, down 3.2% year over year. Voice connections were 58,900, down 1.5% year over year.
Guidance for 2017 (for TDS Division)
For 2017, Telephone & Data Systems projects total operating revenues in the range of $1,125 – $1,150 million. Adjusted EBITDA and adjusted OIBDA are expected in the band of $300 – $340 million while capital expenditure is projected at around $225 million.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimate flatlined during the past month. There has been one revision higher for the current quarter compared to one lower. In the past month, the consensus estimate has shifted by 50% due to these changes.
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 lot on the momentum front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile 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.
Zacks' style scores indicate that the company's stock is suitable for value and growth investors.
Outlook
The stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.
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Why Is Telephone and Data Systems (TDS) Up 5% Since the Last Earnings Report?
More than a month has gone by since the last earnings report for Telephone and Data Systems, Inc. (TDS - Free Report) . Shares have added about 5% in that time frame, underperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Telephone & Data Systems Q3 Earnings and Revenues Lag
Telephone & Data Systems reported disappointing financial results in the third quarter of 2017, wherein both the top and the bottom line missed the Zacks Consensus Estimate.
GAAP net loss in the reported quarter was $181 million or a loss of $1.64 per share against net income of $13 million or 12 cents per share in the year-ago quarter. Quarterly adjusted earnings per share of 8 cents were well below the Zacks Consensus Estimate of 17 cents.
Revenues declined 5% year over year to $1,251 million in the reported quarter, underperforming the Zacks Consensus Estimate of $1,275 million. Operating expenses were $1,483 million, reflecting an increase of 16% year over year. The company reported quarterly operating loss of $360 million against an operating income of $22 million in the year-ago quarter.
United States Cellular Division
GAAP net loss of United States Cellular Corp. came in at $299 million or a loss of $3.51 per share against net income of $17 million or 20 cents per share in the year-ago quarter. However, quarterly adjusted earnings per share of 11 cents were well above the Zacks Consensus Estimate of a penny per share.
Quarterly total revenues of $963 million declined 6% year over year. Also, it missed the Zacks Consensus Estimate of $976.5 million. Quarterly Service revenues decreased 6% to $737 million. Revenues from Equipment sales decreased 5% to $226 million.
Quarterly postpaid ARPU (average revenue per user) decreased to $43.41 from $45.19 at the end of 2016. Postpaid ARPA (average revenue per account) was $116.36 compared with $120.67 at the end of 2016. Postpaid churn declined to 1.16% from 1.41% registered at the end of 2016. Prepaid ARPU decreased to $33.12 from $33.25 registered at the end of 2016. Prepaid churn decreased to 4.75% in the reported quarter from 5.44% at 2016-end.
United States Cellular exited the third quarter of 2017 with a subscriber base of 5,089,000 compared with 5,031,000 at the end of 2016. Postpaid subscriber base totaled 4,513,000 compared with 4,482,000 at the end of 2016. Prepaid subscriber base totaled 515,000, compared with 484,000 at the end of 2016. In the reported quarter, United States Cellular gained a net of 35,000 postpaid subscribers compared with a net loss of 6,000 customers in the year-ago quarter. The company gained 31,000 prepaid customers in the same quarter compared with 67,000 users in the prior-year quarter.
TDS Division
In the reported quarter, total revenues came in at $285 million, reflecting a decline of 1% year over year. Within the segment, revenues from the wireline segment came in at $179 million, up 2% year over year. Cable revenues were $52 million, reflecting an increase of 12% year over year while HMS revenues decreased 18% to $56 million.
Cash Flow
In the third quarter of 2017, Telephone & Data Systems generated $263 million of cash from operations compared with $238 million in the prior-year quarter. Quarterly free cash flow was $107 million compared with $93 million in the year-earlier quarter.
Liquidity
Telephone & Data Systems exited the third quarter of 2017 with cash and short-term investment of $884 million compared with $900 million at the end of 2016. Total debt was $2,463 million compared with $2,445 million at the end of 2016. At the end of the third quarter of 2017, the debt-to-capitalization ratio was 0.35 compared with 0.34 at the end of 2016.
Subscriber Statistics
At the end of the third quarter of 2017, Telephone & Data Systems had 575,300 residential wireline connections compared with 590,900 in the year-ago quarter. Of the total, voice connections were 298,200, decreasing 5.2% year over year. Broadband Connections were 229,900, down 0.9% year over year. IPTV connections were 47,200, up 8.3% year over year. Quarterly total residential revenues per connection were $46.07 compared with $44.25 in the year-ago quarter.
The company exited the third quarter of 2017 with 315,300 commercial wireline connections, down 5.6% year over year. Of the total, voice connections were 146,900, down 8.7% year over year. Broadband Connections were 20,900, declining 3.7% year over year. ManagedIP connections were 147,600, down 2.6% year over year.
Total cable connections were 300,600, up 3.3% year over year. Of the total, Broadband Connections were 143,800, up 10.4% year over year. Video connections were 97,900, down 3.2% year over year. Voice connections were 58,900, down 1.5% year over year.
Guidance for 2017 (for TDS Division)
For 2017, Telephone & Data Systems projects total operating revenues in the range of $1,125 – $1,150 million. Adjusted EBITDA and adjusted OIBDA are expected in the band of $300 – $340 million while capital expenditure is projected at around $225 million.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimate flatlined during the past month. There has been one revision higher for the current quarter compared to one lower. In the past month, the consensus estimate has shifted by 50% due to these changes.
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 lot on the momentum front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile 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.
Zacks' style scores indicate that the company's stock is suitable for value and growth investors.
Outlook
The stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.