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The earnings season is off to a flying start, owing to a slew of upbeat economic data, strong corporate performance and President Donald Trump's tax reform signed into law. However, equity markets have been suffering a sell-off owing to fears of rising rates. Coming to the performance of telecom giants, it has been a mixed bag for telecom companies, with some beating market expectations, while a few failing to do so.
We will now discuss the performance of a few telecom giants such as Verizon (VZ - Free Report) , AT&T Inc (T - Free Report) and Sprint Corp (S - Free Report) .
Verizon
Verizon reported non-GAAP earnings per share of $0.86, missing the Zacks Consensus Estimate of $0.88. However, Verizon’s fourth-quarter revenues of $33.955 billion beat the Zacks Consensus Estimate of $33.146 billion. Revenues for 2017 grew a mere 0.04% to $126.034 billion from its 2016 figure.
Coming to the wireless segment, revenues increased 1.7% year over year to $23.8 billion. Net postpaid customer additions to the wireless segment were 2.1 million. Total retail postpaid churn rate was 1.0%. Moving on to wireline segment, revenues increased 0.1% year over year to $7.6 billion. Moreover, the company’s Fios revenues grew 2.3% year over year to $3.0 billion. The company added 47,000 Fios Internet connections, while it lost 29,000 Fios video connections.
Outlook
Verizon expects its 2018 GAAP revenues and adjusted EPS to grow at low single digits. The company expects its consolidated capital spending in 2018 to be in the range of $17.0-$17.8 billion. On the tax front, Verizon expects to generate a $3.5-$4.0 billion addition to cash flow from operations in 2018, owing to the tax reform.
AT&T
AT&T reported non-GAAP earnings per share of $0.78, surpassing the Zacks Consensus Estimate of $0.65. Moreover, AT&T’s fourth-quarter revenues of $41.676 billion surpassed the consensus mark of $41.193 billion. Revenues for 2017 decreased 2.0% to $160.5 billion from its 2016 figure.
Revenue Performance
The Business Solutions segment revenues increased 2.0% year over year to $18.4 billion.
Entertainment Group revenues decreased 3.5% year over year to $12.7 billion.
Consumer Mobility revenues decreased 1.7% year over year to $8.3 billion.
International revenues increased 16.0% year over year to $2.2 billion.
The telecom company reported net wireless additions of 4.1 million in the quarter, with 2.7 million coming from the United States and 1.3 million from Mexico. Its churn rate came in at 1.38% in the quarter compared with 1.71% in the year-ago quarter.
Outlook
The company announced more than $200 million in bonuses to employees and more than $1 billion capital investment in 2018, owing to savings from the tax reform. Looking at fiscal 2018 guidance, the telecom giant expects adjusted EPS to be around $3.50 and free cash flow to be about $21 billion.
Sprint Corp
Sprint reported non-GAAP earnings per share of -$0.02, beating the Zacks Consensus Estimate of -$0.04. Moreover, Sprint’s fiscal third-quarter revenues of $8.239 billion surpassed the consensus mark of $8.178 billion. Revenues for 2017 decreased 2.0% to $24.323 billion from its 2016 figure.
The Wireless segment revenues decreased 2.9% year over year to $7.928 billion. The Wireline segment revenues declined 20.9% year over year to $393 million. Moreover, the company witnessed net additions of 385,000 wireless customers, including 256,000 postpaid, 63,000 prepaid and 66,000 wholesale and affiliate additions.
Retail postpaid Average Revenue per User (ARPU) decreased to $45.13 from $49.70 in the year-ago quarter. Retail prepaid Average Revenue per User (ARPU) increased to $37.46 from $33.97 in the year-ago quarter.
Outlook
The company expects adjusted EBITDA to be in the mid-point of its range of $10.8-$11.2 billion in fiscal 2017, while it expects operating income to be around $2.5-$2.7 billion. The company anticipates capital expenditures to be in line with its previous expectations of $3.5-$4.0 billion.
In the current scenario, let’s take a look at some ETFs that have a relatively high exposure to the companies discussed (see all Telecommunication ETFs here).
This ETF is one of the most popular funds in the telecom space.
It has AUM of $1.1 billion and charges 10 basis points as fees per year. The fund has a 24.3% exposure to Verizon, 24.1% to AT&T and 2.6% to Sprint (as of Dec 31, 2017). The fund has lost 3.5% in a year and 0.2% year to date. VOX has a Zacks ETF Rank #5 (Strong Sell), with a Medium risk outlook.
This ETF provides exposure to the U.S. telecom space at a really low expense ratio.
It has AUM of $128.1 million and charges 8 basis points as fees per year. The fund has a 24.6% exposure to Verizon, 23.9% to AT&T and 2.3% to Sprint (as of Feb 2, 2018). The fund has returned 1.2% in a year but has lost 0.1% year to date. FCOM has a Zacks ETF Rank #5, with a Medium risk outlook.
This ETF provides exposure to the U.S. telecom industry.
It has AUM of $366.4 million and charges 44 basis points as fees per year. The fund has 16.5% exposure to AT&T, 16.1% to Verizon and 5.2% to Sprint (as of Feb 2, 2018). The fund has lost 12.4% in a year and 1.3% year to date. IYZ has a Zacks ETF Rank #5, with a Medium risk outlook.
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ETFs to Watch on Telecom Earnings
The earnings season is off to a flying start, owing to a slew of upbeat economic data, strong corporate performance and President Donald Trump's tax reform signed into law. However, equity markets have been suffering a sell-off owing to fears of rising rates. Coming to the performance of telecom giants, it has been a mixed bag for telecom companies, with some beating market expectations, while a few failing to do so.
We will now discuss the performance of a few telecom giants such as Verizon (VZ - Free Report) , AT&T Inc (T - Free Report) and Sprint Corp (S - Free Report) .
Verizon
Verizon reported non-GAAP earnings per share of $0.86, missing the Zacks Consensus Estimate of $0.88. However, Verizon’s fourth-quarter revenues of $33.955 billion beat the Zacks Consensus Estimate of $33.146 billion. Revenues for 2017 grew a mere 0.04% to $126.034 billion from its 2016 figure.
Coming to the wireless segment, revenues increased 1.7% year over year to $23.8 billion. Net postpaid customer additions to the wireless segment were 2.1 million. Total retail postpaid churn rate was 1.0%. Moving on to wireline segment, revenues increased 0.1% year over year to $7.6 billion. Moreover, the company’s Fios revenues grew 2.3% year over year to $3.0 billion. The company added 47,000 Fios Internet connections, while it lost 29,000 Fios video connections.
Outlook
Verizon expects its 2018 GAAP revenues and adjusted EPS to grow at low single digits. The company expects its consolidated capital spending in 2018 to be in the range of $17.0-$17.8 billion. On the tax front, Verizon expects to generate a $3.5-$4.0 billion addition to cash flow from operations in 2018, owing to the tax reform.
AT&T
AT&T reported non-GAAP earnings per share of $0.78, surpassing the Zacks Consensus Estimate of $0.65. Moreover, AT&T’s fourth-quarter revenues of $41.676 billion surpassed the consensus mark of $41.193 billion. Revenues for 2017 decreased 2.0% to $160.5 billion from its 2016 figure.
Revenue Performance
The Business Solutions segment revenues increased 2.0% year over year to $18.4 billion.
Entertainment Group revenues decreased 3.5% year over year to $12.7 billion.
Consumer Mobility revenues decreased 1.7% year over year to $8.3 billion.
International revenues increased 16.0% year over year to $2.2 billion.
The telecom company reported net wireless additions of 4.1 million in the quarter, with 2.7 million coming from the United States and 1.3 million from Mexico. Its churn rate came in at 1.38% in the quarter compared with 1.71% in the year-ago quarter.
Outlook
The company announced more than $200 million in bonuses to employees and more than $1 billion capital investment in 2018, owing to savings from the tax reform. Looking at fiscal 2018 guidance, the telecom giant expects adjusted EPS to be around $3.50 and free cash flow to be about $21 billion.
Sprint Corp
Sprint reported non-GAAP earnings per share of -$0.02, beating the Zacks Consensus Estimate of -$0.04. Moreover, Sprint’s fiscal third-quarter revenues of $8.239 billion surpassed the consensus mark of $8.178 billion. Revenues for 2017 decreased 2.0% to $24.323 billion from its 2016 figure.
The Wireless segment revenues decreased 2.9% year over year to $7.928 billion. The Wireline segment revenues declined 20.9% year over year to $393 million. Moreover, the company witnessed net additions of 385,000 wireless customers, including 256,000 postpaid, 63,000 prepaid and 66,000 wholesale and affiliate additions.
Retail postpaid Average Revenue per User (ARPU) decreased to $45.13 from $49.70 in the year-ago quarter. Retail prepaid Average Revenue per User (ARPU) increased to $37.46 from $33.97 in the year-ago quarter.
Outlook
The company expects adjusted EBITDA to be in the mid-point of its range of $10.8-$11.2 billion in fiscal 2017, while it expects operating income to be around $2.5-$2.7 billion. The company anticipates capital expenditures to be in line with its previous expectations of $3.5-$4.0 billion.
In the current scenario, let’s take a look at some ETFs that have a relatively high exposure to the companies discussed (see all Telecommunication ETFs here).
Vanguard Telecommunication Services ETF (VOX - Free Report)
This ETF is one of the most popular funds in the telecom space.
It has AUM of $1.1 billion and charges 10 basis points as fees per year. The fund has a 24.3% exposure to Verizon, 24.1% to AT&T and 2.6% to Sprint (as of Dec 31, 2017). The fund has lost 3.5% in a year and 0.2% year to date. VOX has a Zacks ETF Rank #5 (Strong Sell), with a Medium risk outlook.
Fidelity MSCI Telecommunication Services ETF (FCOM - Free Report)
This ETF provides exposure to the U.S. telecom space at a really low expense ratio.
It has AUM of $128.1 million and charges 8 basis points as fees per year. The fund has a 24.6% exposure to Verizon, 23.9% to AT&T and 2.3% to Sprint (as of Feb 2, 2018). The fund has returned 1.2% in a year but has lost 0.1% year to date. FCOM has a Zacks ETF Rank #5, with a Medium risk outlook.
iShares U.S. Telecommunications ETF (IYZ - Free Report)
This ETF provides exposure to the U.S. telecom industry.
It has AUM of $366.4 million and charges 44 basis points as fees per year. The fund has 16.5% exposure to AT&T, 16.1% to Verizon and 5.2% to Sprint (as of Feb 2, 2018). The fund has lost 12.4% in a year and 1.3% year to date. IYZ has a Zacks ETF Rank #5, with a Medium risk outlook.
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Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>