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U.S. Cellular (USM) Q3 Earnings Top Estimates, Shares Down
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United States Cellular Corporation (USM - Free Report) reported solid third-quarter 2020 financial results, with the top and the bottom lines surpassing the respective Zacks Consensus Estimate. Churn rate mitigation strategies and accretive subscriber base on the back of multiyear network modernization initiatives buoyed U.S. Cellular’s quarterly performance. However, the results failed to impress the market as its shares tumbled 4.5% to close at $28.72 as of Nov 6, probably due to insipid guidance.
Net Income
Net income in the September quarter was $85 million or 97 cents per share compared with $23 million or 27 cents per share in the year-ago quarter. Despite relative flat revenue trajectory, the more than three-fold rise in earnings was primarily driven by lower operating costs and lower income tax expenses. The bottom line beat the Zacks Consensus Estimate by 67 cents.
United States Cellular Corporation Price, Consensus and EPS Surprise
Quarterly total operating revenues remained relatively flat at $1,027 million. Lower data rates along with a decrease in new smartphone unit sales led to soft revenues. The top line surpassed the consensus estimate of $997 million. While service revenues inched up 0.1% to $775 million, the same from equipment sales declined 1.9% to $252 million.
Although social distancing measures due to coronavirus fears are leading to less store traffic, the company witnessed a substantial low churn rate with increased demand for connected devices. This eventually benefited subscribers with advanced network infrastructure. Also, the company is focused to accelerate further growth opportunities with 5G deployments into additional markets on the back of incremental network investments, while addressing the accretive networking demands of customers.
Other Details
Total operating expenses declined 4.8% year over year to $962 million, primarily due to lower depreciation and amortization coupled with selling, general and administrative expenses. Operating income was $65 million compared with $20 million in the prior-year quarter. Adjusted EBITDA in the first nine months of 2020 came in at $841 million whereas adjusted OIBDA was $698 million.
Operating Metrics
While total cell sites in service were 6,758 at the end of the reported quarter compared with 6,554 a year ago, the company-owned towers were 4,246, up from 4,123. As of Sep 30, 2020, postpaid ARPU (average revenue per user) increased to $47.10 from $46.16 and postpaid ARPA (average revenue per account) rose to $123.27 from $119.87. Postpaid churn declined to 1.06% from 1.38% reported in the year-ago quarter. Prepaid ARPU increased to $35.45 from $34.35, while prepaid churn fell to 3.59% from 4.03%.
Cash Flow & Liquidity
During the first nine months of 2020, U.S. Cellular generated $950 million of net cash from operations compared with $687 million in the year-ago quarter. In the same period, the company’s non-GAAP free cash flow totaled $260 million compared with $248 million in the prior-year quarter.
As of Sep 30, 2020, the wireless telecommunications service provider had $931 million in cash and cash equivalents with $2,108 million of net long-term debt.
2020 Guidance Updated
U.S. Cellular has provided revised guidance for full-year 2020. The company anticipates service revenues in the band of $3,025-$3,075 million compared with prior expectation of $3,000-$3,100 million. Adjusted EBITDA is projected in the range of $975-$1,050 million versus previous outlook of $900-$1,025 million. U.S. Cellular’s adjusted OIBDA is expected in the band of $800-$875 million, up from $725-$850 million. However, capital expenditures remained unchanged and are expected between $850 million and $950 million.
Going Forward
U.S. Cellular continues to strengthen its customer base while improving churn management and enhancing brand positioning. With judicious expense management, the company is making efforts to provide essential products and services. Markedly, the company achieved a 5G millimeter wave milestone in collaboration with leading tech behemoths — Qualcomm Incorporated (QCOM - Free Report) and Ericsson (ERIC - Free Report) . It also made some organizational changes in the reported quarter while continuing to enjoy strong subscriber base on the back of low churn rate.
Progressing with 5G and multiyear network modernization initiatives, the company aims to attract new customers by providing superior quality network and national coverage. Despite uncertainties stemming from COVID-19 pandemic, U.S. Cellular is focused to create an enhanced network experience and generate new revenue opportunities that could positively impact U.S. Cellular’s profitability in the near term.
Zacks Rank & Stock to Consider
U.S. Cellular currently carries a Zacks Rank #2 (Buy).
Cambium delivered a trailing four-quarter positive earnings surprise of 137.8%, on average.
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U.S. Cellular (USM) Q3 Earnings Top Estimates, Shares Down
United States Cellular Corporation (USM - Free Report) reported solid third-quarter 2020 financial results, with the top and the bottom lines surpassing the respective Zacks Consensus Estimate. Churn rate mitigation strategies and accretive subscriber base on the back of multiyear network modernization initiatives buoyed U.S. Cellular’s quarterly performance. However, the results failed to impress the market as its shares tumbled 4.5% to close at $28.72 as of Nov 6, probably due to insipid guidance.
Net Income
Net income in the September quarter was $85 million or 97 cents per share compared with $23 million or 27 cents per share in the year-ago quarter. Despite relative flat revenue trajectory, the more than three-fold rise in earnings was primarily driven by lower operating costs and lower income tax expenses. The bottom line beat the Zacks Consensus Estimate by 67 cents.
United States Cellular Corporation Price, Consensus and EPS Surprise
United States Cellular Corporation price-consensus-eps-surprise-chart | United States Cellular Corporation Quote
Revenues
Quarterly total operating revenues remained relatively flat at $1,027 million. Lower data rates along with a decrease in new smartphone unit sales led to soft revenues. The top line surpassed the consensus estimate of $997 million. While service revenues inched up 0.1% to $775 million, the same from equipment sales declined 1.9% to $252 million.
Although social distancing measures due to coronavirus fears are leading to less store traffic, the company witnessed a substantial low churn rate with increased demand for connected devices. This eventually benefited subscribers with advanced network infrastructure. Also, the company is focused to accelerate further growth opportunities with 5G deployments into additional markets on the back of incremental network investments, while addressing the accretive networking demands of customers.
Other Details
Total operating expenses declined 4.8% year over year to $962 million, primarily due to lower depreciation and amortization coupled with selling, general and administrative expenses. Operating income was $65 million compared with $20 million in the prior-year quarter. Adjusted EBITDA in the first nine months of 2020 came in at $841 million whereas adjusted OIBDA was $698 million.
Operating Metrics
While total cell sites in service were 6,758 at the end of the reported quarter compared with 6,554 a year ago, the company-owned towers were 4,246, up from 4,123. As of Sep 30, 2020, postpaid ARPU (average revenue per user) increased to $47.10 from $46.16 and postpaid ARPA (average revenue per account) rose to $123.27 from $119.87. Postpaid churn declined to 1.06% from 1.38% reported in the year-ago quarter. Prepaid ARPU increased to $35.45 from $34.35, while prepaid churn fell to 3.59% from 4.03%.
Cash Flow & Liquidity
During the first nine months of 2020, U.S. Cellular generated $950 million of net cash from operations compared with $687 million in the year-ago quarter. In the same period, the company’s non-GAAP free cash flow totaled $260 million compared with $248 million in the prior-year quarter.
As of Sep 30, 2020, the wireless telecommunications service provider had $931 million in cash and cash equivalents with $2,108 million of net long-term debt.
2020 Guidance Updated
U.S. Cellular has provided revised guidance for full-year 2020. The company anticipates service revenues in the band of $3,025-$3,075 million compared with prior expectation of $3,000-$3,100 million. Adjusted EBITDA is projected in the range of $975-$1,050 million versus previous outlook of $900-$1,025 million. U.S. Cellular’s adjusted OIBDA is expected in the band of $800-$875 million, up from $725-$850 million. However, capital expenditures remained unchanged and are expected between $850 million and $950 million.
Going Forward
U.S. Cellular continues to strengthen its customer base while improving churn management and enhancing brand positioning. With judicious expense management, the company is making efforts to provide essential products and services. Markedly, the company achieved a 5G millimeter wave milestone in collaboration with leading tech behemoths — Qualcomm Incorporated (QCOM - Free Report) and Ericsson (ERIC - Free Report) . It also made some organizational changes in the reported quarter while continuing to enjoy strong subscriber base on the back of low churn rate.
Progressing with 5G and multiyear network modernization initiatives, the company aims to attract new customers by providing superior quality network and national coverage. Despite uncertainties stemming from COVID-19 pandemic, U.S. Cellular is focused to create an enhanced network experience and generate new revenue opportunities that could positively impact U.S. Cellular’s profitability in the near term.
Zacks Rank & Stock to Consider
U.S. Cellular currently carries a Zacks Rank #2 (Buy).
Another top-ranked stock in the industry is Cambium Networks Corporation (CMBM - Free Report) , carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Cambium delivered a trailing four-quarter positive earnings surprise of 137.8%, on average.
Breakout Biotech Stocks with Triple-Digit Profit Potential
The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.
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