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U.S. Cellular (USM) Q4 Earnings & Revenues Beat Estimates

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United States Cellular Corporation (USM - Free Report) reported healthy fourth-quarter 2020 results, wherein the top and the bottom lines beat the respective Zacks Consensus Estimate.

The Chicago, IL-based wireless carrier continues its network modernization program and investments in 5G.

Net Income

Net income in the December quarter was $5 million or 6 cents per share compared with $18 million or 20 cents per share in the year-ago quarter. The decline was due to higher interest and income tax expenses. The bottom line, however, beat the Zacks Consensus Estimate by a penny.

In 2020, net income was $229 million or $2.62 per share compared with $127 million or $1.44 per share in 2019.

Revenues

Quarterly total operating revenues inched up 2% year over year to $1,073 million, which reflects growth in retail net additions alongside customer satisfaction. While service revenues jumped 1.7% to $776 million, equipment sales grew 2.8% to $297 million. Also, the top line surpassed the consensus estimate of $1,058 million.

In 2020, operating revenues remained almost flat year over year at $4,037 million.

Other Quarterly Details

Total operating expenses increased 1.3% year over year to $1,069 million. Operating income was $4 million against operating loss of $3 million in the prior-year quarter. Adjusted EBITDA came in at $222 million, while adjusted OIBDA was $178 million.

Operating Metrics

While total cell sites in service were 6,797 at the end of the quarter compared with 6,578 a year ago, the company-owned towers were 4,271, up from 4,166. As of Dec 31, 2020, postpaid average revenue per user (ARPU) increased to $47.51 from $46.57 year over year, and postpaid average revenue per account (ARPA) grew to $124.87 from $120.99. Postpaid churn declined to 1.21% from 1.38% reported in the year-ago quarter. Prepaid ARPU increased to $35.15 from $34.11, while prepaid churn fell to 4.24% from 4.40%.

Cash Flow & Liquidity

In 2020, U.S. Cellular generated $1,237 million of net cash from operations compared with $724 million in 2019. Non-GAAP free cash flow totaled $248 million compared with $74 million.

As of Dec 31, 2020, the company had $1,271 million in cash and cash equivalents with $2,489 million of long-term debt. This compares with the respective tallies of $285 million and $1,502 million a year ago.

2021 Outlook

U.S. Cellular is focused on market share expansion, accelerating business opportunities that use 5G and IoT. For 2021, the company expects service revenues in the band of $3,025-$3,125 million. Adjusted EBITDA is projected in the range of $975-$1,125 million. Adjusted OIBDA is anticipated in the band of $800-$950 million. Capital expenditures are estimated between $775 million and $875 million.

Zacks Rank & Other Stocks to Consider

U.S. Cellular currently sports a Zacks Rank #1 (Strong Buy).

Some other top-ranked stocks in the broader industry are Aviat Networks (AVNW - Free Report) , Plantronics and Ubiquiti (UI - Free Report) , each sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Aviat Networks delivered a trailing four-quarter earnings surprise of 61.7%, on average.

Plantronics delivered a trailing four-quarter earnings surprise of 560.4%, on average.

Ubiquiti delivered a trailing four-quarter earnings surprise of 37.1%, on average.

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