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Telecom Stock Roundup: AT&T & Verizon Surpass Q2 Earnings Estimates & More

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The U.S. telecom stocks witnessed a relatively flat trajectory in the past week as earnings took the center stage and geopolitical tensions took the backseat. The quarterly performance of hitherto reported companies has been a mixed bag, with better-than-expected bottom-line figures despite broad-based revenue hit by the coronavirus-induced turmoil. However, estranged Sino-U.S. relationship with ebbing diplomatic ties remained a latent threat as the communist nation made a tit-for-tat move and asked Washington to vacate its consulate in Chengdu.

The U.S. government had earlier ordered the shutdown of China’s Houston consulate, citing the move as a necessary step for protecting intellectual property rights and data sovereignty. This evoked a sharp response from China and it shut down the U.S. consulate in Chengdu, the capital of Sichuan province in the southwest part of the country, which is regarded as one of the strategic positions by Washington given its close proximity to Tibet. With expectations of another round of coronavirus-related fiscal stimulus and a favorable earnings season, the industry appeared to shake off the negative vibes from the geopolitical crisis and held its fort among all adversities.

The FCC has selected the U.S. Telecom-led Industry Traceback Group as the Official Consortium for coordinating industry-led efforts to trace the roots of spam calls so that the growing menace of robocalls are eliminated at the core and criminals are brought to book. Meanwhile, the Congress is aiming to gain a consensus on additional government stimulus for the pandemic, with a proposal of $1 billion in funding to subsidize FCC’s plan to rip out China-based Huawei and ZTE gear from the domestic telecom network. The move gains precedence as various media reports claim that the telecom sector is likely to see healthy growth in the second half of the year despite worldwide restrictions. The spurt of growth is largely attributable to new infrastructure investments and 5G adoption amid the coronavirus-induced challenges.  

Regarding company-specific news, 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) reported relatively healthy second-quarter 2020 results with adjusted earnings surpassing the Zacks Consensus Estimate and revenues missing the same as the coronavirus pandemic hit top-line growth, fueling uncertainty within the organization and limiting future visibility. Despite the worldwide mayhem that led to short-term financial impacts, the company expects to continue investing in key areas and adjust its business according to the demand of the situation to fuel long-term growth, while maintaining a healthy dividend payment and actively pruning debt.

Excluding non-recurring items, adjusted earnings were 83 cents per share compared with 89 cents in the year-earlier quarter. Adjusted earnings for the second quarter surpassed the Zacks Consensus Estimate by 5 cents. Quarterly GAAP operating revenues decreased 8.9% year over year to $40,950 million, largely due to lower revenues from legacy wireline services, reduced advertising and content revenues from WarnerMedia and domestic video, and adverse currency translation effects. The top line missed the Zacks Consensus Estimate of $41,393 million.
2.     Verizon Communications Inc. (VZ - Free Report) reported healthy second-quarter 2020 results, with the top and bottom lines beating the Zacks Consensus Estimate. This highlights the company’s disciplined network strategy for long-term growth along with strong operational performance. Verizon expects to see strong momentum heading into the second half of 2020.

Non-GAAP net income per share came in at $1.18 compared with $1.23 in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by 2 cents. Quarterly aggregate operating revenues declined 5.1% year over year to $30,447 million. This was the result of substantial declines in wireless equipment revenues in the Consumer and Business segments, primarily due to limited in-store engagement and the impact of COVID-19 on customer behavior. Nevertheless, the top line surpassed the consensus mark of $29,910 million.

3.      Corning Inc. (GLW - Free Report) reported healthy second-quarter 2020 results, with the top and bottom lines beating the Zacks Consensus Estimate.

Core net income came in at $218 million or 25 cents per share compared with $410 million or 45 cents in the prior-year quarter. The bottom line beat the Zacks Consensus Estimate by 14 cents, with an earnings surprise of 127.3%. Quarterly core sales declined to $2,588 million from $2,986 million recorded in the year-ago quarter. Nevertheless, the top line surpassed the consensus mark of $2,386 million.

4.      Juniper Networks, Inc. (JNPR - Free Report) reported decent second-quarter 2020 results, with the top line surpassing the Zacks Consensus Estimate. The Sunnyvale, CA-based network products and services provider experienced solid demand during the quarter.

Non-GAAP net income was $116.3 million or 35 cents per share (above the midpoint of the company’s guidance range) compared with $139.5 million or 40 cents in the year-ago quarter. The bottom line matched the Zacks Consensus Estimate. Quarterly total revenues amounted to $1,086.3 million (above the mid-point of the company’s guidance range) compared with $1,102.5 million reported in the year-ago quarter. The top line beat the consensus mark of $1,053 million. 

5.      Nokia Corporation (NOK - Free Report) recently announced its collaboration with leading mobile network operator, United States Cellular Corporation, for the deployment of its AirScale mmWave radio products. The deployment will complement the carrier’s low-band infrastructure and power an advanced IoT and 5G ecosystem for its enterprise customers.

U.S. Cellular will capitalize on the Nokia AirFrame open edge solution and the Worldwide IoT Network Grid (WING) solution for simplified and cost-effective deployment of low-latency network connectivity.

Price Performance

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

In the past five trading days, Arista Networks has been the best performer with its stock rising 5.3%, while AT&T was the biggest decliner with its stock declining 2%.

Over the past six months, T-Mobile has been the best performer with its stock appreciating 23.5%, while CenturyLink was the biggest decliner with its stock falling 41.1%.

Over the past six months, the Zacks Telecommunications Services industry declined 8.7%, while the S&P 500 recorded average loss of 0.1%.

What’s Next in the Telecom Space?

In addition to the remaining earnings releases and 5G deployments, all eyes will remain glued to how the administration attempts to safeguard the interests of domestic firms from Chinese threats.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

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