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Telecom Stock Roundup: AT&T, Verizon Miss Q1 Revenue Estimates & More

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In the past five trading days, telecom stocks maintained a flat trajectory for the most of the week but declined sharply at the final stages due to lackluster quarterly results by some of the sector biggies. In addition to the muted earnings performance, the industry remained mired in uncertainty regarding the probable merger of T-Mobile US Inc. (TMUS - Free Report) and Sprint Corporation (S - Free Report) . With the industry at the threshold of a nationwide 5G launch, stiff resistance from the Department of Justice antitrust staff seems to have dented the competitive edge of the telecom sector in general and some of its leading firms in particular.

The overall earnings season has unfolded on a relatively promising note, with better-than-expected performance by most sectors dispelling widespread recessionary fears. Buoyed by the renewed optimism and encouraging trends from the hitherto declared results, the equity markets are currently trading near record highs and appear well poised to continue the uptrend.

However, the Technology sector, of which the Telecom stocks are part, has recorded a sedate start to the earnings season and is on track to record one of the softest performances in recent years. Taking the broader picture in count, the industry appears to be still grappling with the aftereffects of the trade war and higher investments for technology and infrastructure upgrade for 5G deployments.  

Uncertainty regarding U.S.-China trade negotiations remained another stumbling block, as the nine-month old trade war that disrupted supply chains and weighed on the world economy is yet to be fully resolved. Although both the warring countries have agreed upon the enforcement mechanisms, the finer details are reportedly still under deliberations. As the industry awaits an early resolution to the prolonged bilateral talks to better focus on the impending 5G boom, efforts are on to give a final push to a mutually acceptable trade deal by May end that is easily enforceable.

Regarding company-specific news, quarterly earnings primarily took the center stage over the past five trading days.

Recap of the Week’s Most Important Stories

1.    AT&T Inc. (T - Free Report) recorded first-quarter 2019 adjusted earnings of 86 cents per share compared with 85 cents in the year-earlier quarter, which beat the Zacks Consensus Estimate by a penny.

Although consolidated revenues increased 17.8% year over year to $44,827 million, due to the accretive Time Warner acquisition and solid performances by domestic wireless services and advertising unit Xandr, it missed the Zacks Consensus Estimate of $45,093 million. (Read more: AT&T Marginally Beats on Q1 Earnings, Misses on Revenues)

2.    Verizon Communications Inc. (VZ - Free Report) recorded first-quarter 2019 adjusted earnings of $1.20 per share compared with $1.17 in the year-earlier quarter, which beat the Zacks Consensus Estimate by 3 cents.

Consolidated GAAP revenues increased 1.1% year over year to $32,128 million but missed the Zacks Consensus Estimate of $32,165 million. (Read more: Verizon Q1 Earnings Beat on Wireless Strength, View Up)

3.    First-quarter 2019 net earnings for Badger Meter, Inc. (BMI - Free Report) were $10.8 million or 37 cents per share compared with $7.5 million or 26 cents per share in the year-ago quarter, primarily driven by lower cost of sales. The figure beat the Zacks Consensus Estimate by a penny.

Net sales were $104.9 million compared with $105 million in the year-ago quarter, owing to inclement weather conditions and deferred customer orders. The top line lagged the Zacks Consensus Estimate of $111 million. (Read more: Badger Meter Q1 Earnings Beat Estimates, Revenues Miss)

4.    ADTRAN, Inc. (ADTN - Free Report) reported better-than-expected results in first-quarter 2019, wherein both the top line and the bottom line increased year over year.

Non-GAAP net income came in at $4.9 million or 10 cents per share against a loss of $15.8 million or loss of 33 cents per share in the prior-year quarter. The Zacks Consensus Estimate for loss was pegged at 5 cents. Quarterly sales were $143.8 million compared with $120.8 million in the prior-year quarter, beating the Zacks Consensus Estimate of $141 million. (Read more: ADTRAN Q1 Earnings and Revenues Beat, Increase Y/Y)

Price Performance

The following table shows the price movement of some of the major telecom stocks over the past week and during the past six months.



In the past five trading days, Qualcomm was the biggest gainer with its share price increasing 8.9% while AT&T was the largest decliner with its stock down 3.8%.

Over the past six months, Qualcomm has been the best performer with its stock appreciating 28%, while Sprint was the sole decliner with its shares falling 3.9%.

Over the past six months, the Zacks Telecommunications Services industry has recorded average growth of 2.2% while the S&P 500 rallied 9.9%.



What’s Next in the Telecom Space?

In addition to product launches and deployment of 5G technologies, all eyes will remain glued to how other industry participants fare in the earnings season and in what way the United States and China continue their negotiations for a long-term solution to the trade war.

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