United States Cellular Corp. (USM - Free Report) – a subsidiary of Telephone & Data Systems Inc. (TDS - Free Report) – posted strong financial results in the second quarter of 2016. Both the top and the bottom line outpaced the respective Zacks Consensus Estimate.
In second-quarter 2016, GAAP net income came in at $27 million or 32 cents per share compared with a net income of $19 million or 23 cents in the year-ago quarter. Quarterly earnings per share of 32 cents were well ahead of the Zacks Consensus Estimate of 17 cents.
Quarterly revenues of $980 million were up 0.4% year over year and ahead of the Zacks Consensus Estimate of $969 million. Quarterly Service revenues decreased 8% to $762 million. Revenues from Equipment sales were up a substantial 44% to $218 million.
Smartphone sales retained its strength and represented 77% penetration among postpaid customers, up from 69% recorded in the year-ago quarter. Total cell sites in service were 6,324 compared with 6,223 in the year-ago quarter. Smartphones sold, as a percentage of total handsets sold, constituted 91% against 87% in the prior-year quarter.
Operating Expenses and Income
In the second quarter of 2016, total operating expenses inched down 1% to $962 million. Moreover, the company reported an operating income of $18 million, up a whopping 125% year over year.
Cash Flow
In the quarter under review, cash from operations came in at $98 million compared with $168 million in the prior-year quarter. Quarterly adjusted free cash flow was $25 million compared with $32 million in the year-ago quarter.
Liquidity
United States Cellular exited the second quarter with cash and cash equivalents of $621 million compared with $715 million at the end of 2015. At second-quarter end, total debt was $1,634 million versus $1,640 million at the end of 2015. The debt-to-capitalization ratio at the end of the reported quarter was 0.31, flat with the end-2015 figure.
ARPU & Churn
Quarterly postpaid ARPU (average revenue per user) decreased to $47.37 from $53.62 in the prior-year quarter. Postpaid ARPA (average revenue per account) was $124.91 versus $133.85 in the year-earlier quarter. Postpaid churn fell to 1.20% from 1.34% recorded in the second quarter of 2015. Prepaid ARPU decreased to $34.58 from $35.98 in the prior-year quarter. Prepaid churn decreased to 4.86% in the reported quarter from 5.22% a year-ago.
Subscriber Statistics
United States Cellular exited the second quarter with a subscriber base of 4,973,000 compared with 4,779,000 at the end of the year-ago quarter. Postpaid subscriber base was 4,490,000 compared with 4,324,000 at the end of the prior-year quarter. Meanwhile, prepaid subscriber base totaled 413,000 compared with 368,000 at the end of the year-ago quarter. In the reported quarter, United States Cellular added a net of 36,000 postpaid subscribers compared with 17,000 in the year-ago quarter. The company also gained 14,000 prepaid customers in the same quarter compared with 8,000 in the prior-year quarter.
Guidance
U.S. Cellular reaffirmed its guidance for 2016. The company expects total operating revenue in the band of $3,900–$4,100 million. Adjusted EBITDA is expected at $725–$850 million while capital expenditure is estimated at around $500 million. The company projects operating cash flow in the range of $525--$650 million.
Zacks Rank & Other Key Picks
U.S. Cellular currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the sector are Cincinnati Bell Inc. and Telecom Italia S.p.A. . Both stocks carry a Zacks Rank #2 (Buy).
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United States Cellular Corp. (USM - Free Report) – a subsidiary of Telephone & Data Systems Inc. (TDS - Free Report) – posted strong financial results in the second quarter of 2016. Both the top and the bottom line outpaced the respective Zacks Consensus Estimate.
In second-quarter 2016, GAAP net income came in at $27 million or 32 cents per share compared with a net income of $19 million or 23 cents in the year-ago quarter. Quarterly earnings per share of 32 cents were well ahead of the Zacks Consensus Estimate of 17 cents.
Quarterly revenues of $980 million were up 0.4% year over year and ahead of the Zacks Consensus Estimate of $969 million. Quarterly Service revenues decreased 8% to $762 million. Revenues from Equipment sales were up a substantial 44% to $218 million.
Smartphone sales retained its strength and represented 77% penetration among postpaid customers, up from 69% recorded in the year-ago quarter. Total cell sites in service were 6,324 compared with 6,223 in the year-ago quarter. Smartphones sold, as a percentage of total handsets sold, constituted 91% against 87% in the prior-year quarter.
Operating Expenses and Income
In the second quarter of 2016, total operating expenses inched down 1% to $962 million. Moreover, the company reported an operating income of $18 million, up a whopping 125% year over year.
Cash Flow
In the quarter under review, cash from operations came in at $98 million compared with $168 million in the prior-year quarter. Quarterly adjusted free cash flow was $25 million compared with $32 million in the year-ago quarter.
Liquidity
United States Cellular exited the second quarter with cash and cash equivalents of $621 million compared with $715 million at the end of 2015. At second-quarter end, total debt was $1,634 million versus $1,640 million at the end of 2015. The debt-to-capitalization ratio at the end of the reported quarter was 0.31, flat with the end-2015 figure.
ARPU & Churn
Quarterly postpaid ARPU (average revenue per user) decreased to $47.37 from $53.62 in the prior-year quarter. Postpaid ARPA (average revenue per account) was $124.91 versus $133.85 in the year-earlier quarter. Postpaid churn fell to 1.20% from 1.34% recorded in the second quarter of 2015. Prepaid ARPU decreased to $34.58 from $35.98 in the prior-year quarter. Prepaid churn decreased to 4.86% in the reported quarter from 5.22% a year-ago.
Subscriber Statistics
United States Cellular exited the second quarter with a subscriber base of 4,973,000 compared with 4,779,000 at the end of the year-ago quarter. Postpaid subscriber base was 4,490,000 compared with 4,324,000 at the end of the prior-year quarter. Meanwhile, prepaid subscriber base totaled 413,000 compared with 368,000 at the end of the year-ago quarter. In the reported quarter, United States Cellular added a net of 36,000 postpaid subscribers compared with 17,000 in the year-ago quarter. The company also gained 14,000 prepaid customers in the same quarter compared with 8,000 in the prior-year quarter.
Guidance
U.S. Cellular reaffirmed its guidance for 2016. The company expects total operating revenue in the band of $3,900–$4,100 million. Adjusted EBITDA is expected at $725–$850 million while capital expenditure is estimated at around $500 million. The company projects operating cash flow in the range of $525--$650 million.
Zacks Rank & Other Key Picks
U.S. Cellular currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the sector are Cincinnati Bell Inc. and Telecom Italia S.p.A. . Both stocks carry a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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