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Telephone and Data Systems (TDS) Q1 Earnings Beat Estimates

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Telephone and Data Systems, Inc. (TDS - Free Report) reported healthy first-quarter 2021 results, wherein both the bottom line and the top line beat the respective Zacks Consensus Estimate.

Net Income

Net income in the March quarter was $57 million or 48 cents per share compared with $69 million or 59 cents per share in the prior-year quarter. The decline was primarily due to higher interest and income tax expenses. The bottom line, however, beat the Zacks Consensus Estimate by 14 cents.

Revenues

Quarterly total operating revenues increased 4.5% year over year to $1,318 million, driven by the U.S. Cellular and TDS Telecom businesses. Also, the top line surpassed the consensus estimate of $1,281 million.

Segment Results

Revenues at U.S. Cellular grew 6.2% year over year to $1,023 million. The growth shows the positive impact of higher average revenue per user (ARPU), along with strength in postpaid and prepaid handset additions. U.S. Cellular’s investments in 5G and network modernization programs are on track as it continues to meet customers’ expectations. Total operating expenses increased to $939 million from $913 million. Operating income improved to $84 million from $50 million in the year-ago quarter. Postpaid ARPU improved to $47.65 from $47.23, and average revenue per account rose to $125.25 from $122.92. Prepaid ARPU increased to $35.25 from $34.07 in the prior-year quarter.

Revenues at TDS Telecom were $249 million, up 3.8% year over year, driven by significant growth in residential customer connections. TDS Telecom has reached a milestone of 500,000 total broadband connections. It plans to double the number of service addresses built with fiber this year. Total operating expenses increased to $217 million from $212 million. Operating income improved to $32 million from $28 million in the year-ago quarter.

Cash Flow & Liquidity

During the first quarter, Telephone and Data Systems generated $165 million of net cash from operations compared with $367 million in the year-ago quarter. Non-GAAP free cash flow was a negative $55 million compared with negative $10 million a year ago.

As of Mar 31, 2021, the company had $1,042 million in cash and cash equivalents with $3,991 million of long-term debt. This compares with the respective tallies of $1,429 million and $3,424 million at the end of the previous quarter.

2021 Guidance

For 2021, Telephone and Data Systems continues to expect total operating revenues at TDS Telecom in the range of $975-$1,025 million. Adjusted EBITDA is projected to be $290-$320 million. Adjusted OIBDA is anticipated to be $290-$320 million. Capital expenditures are estimated in the band of $425-$475 million.

However, the company has raised estimates for U.S. Cellular. It now expects service revenues in the band of $3,050-$3,150 million, up from prior guidance of $3,025-$3,125 million. Adjusted EBITDA is projected in the range of $1,025-$1,125 million, changed from prior guidance of $975-$1,125 million. Adjusted OIBDA is anticipated in the band of $850-$950 million, changed from prior guidance of $800-$950 million. Capital expenditures are estimated between $775 million and $875 million, unchanged from the prior projection.

Zacks Rank & Stocks to Consider

Telephone and Data Systems currently has a Zacks Rank #5 (Strong Sell).

Some better-ranked stocks in the broader sector are Vicor Corporation (VICR - Free Report) , Cogent Communications Holdings, Inc. (CCOI - Free Report) and Western Digital Corporation (WDC - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Vicor delivered a trailing four-quarter earnings surprise of 80.6%, on average.

Cogent delivered a trailing four-quarter earnings surprise of 29%, on average.

Western Digital delivered a trailing four-quarter earnings surprise of 26.3%, on average.

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