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U.S. telecom stocks traded relatively flat on average over the past week amid fears of resurgence of coronavirus cases with the spread of the Delta variant, and speculations of protracted economic recovery owing to mounting inflationary pressures. The uptick in infections and imposition of fresh restrictions in several parts of Asia and Europe threatened to derail the global economic revival. The virus even endangered the progress of the infrastructure bill in the Senate as key Senators were bugged by the new variant of the contagious disease, casting a doubt about the timely advancement of an already delayed bill. However, continued administrative efforts to set up guardrails and legislation to safeguard the interests of domestic firms appeared to offer a cushion to the beleaguered industry. In addition, better-than-expected earnings results from hitherto reported companies appeared to spur optimism and offset the doom and gloom in the industry.
The multi-billion infrastructure bill that was recently passed by the Senate after months of painstaking negotiations hit a stumbling block with surge in COVID-19 cases by the fast-spreading Delta variant. The bill includes a $65 billion provision to significantly expand broadband access to Americans, as the administration aims to fortify its technological prowess to thwart the dominance of countries like China. The plan envisions reaching the underserved areas of the country and prioritizing support for broadband networks affiliated with local governments, nonprofit organizations and cooperatives to encourage strong competition with privately-owned companies. The plan has also earmarked funds for the tribal areas that lack access to high-speed Internet. It is likely to lower the prices for Internet services by requiring funding recipients to offer a low-cost affordable plan and encourage price transparency. The timely passage of the bill could have worked wonders for the industry reeling under supply chain disruptions and demand-supply imbalance.
The industry received a boost when the Senate Commerce Committee approved the "Secure Equipment Act of 2021", aimed at strengthening the approval guidelines for communication products from foreign firms. The overwhelming bipartisan support paved the passage of the bill to the next stage and is likely to secure a vote on the Senate floor in the near future.
Regarding company-specific news, quarterly earnings primarily took the center stage over the past five trading days.
Recap of the Week’s Most Important Stories
1. Nokia Corporation (NOK - Free Report) reported healthy second-quarter 2021 results, wherein the bottom line beat the Zacks Consensus Estimate. Focus on capital allocation and technology leadership in 2021 is expected to aid it to grow profitably in 2022 and beyond.
Comparable profit came in at €532 million ($641 million) or €0.09 (11 cents) per share, up from €311 million or €0.06 per share in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by 5 cents. On a constant currency basis, quarterly net sales grew 9% year over year to €5,313 million ($6,401 million). This was driven by growth across all business groups, with particular strength in Network Infrastructure. Reported net sales increased 4.3%. The top line marginally missed the consensus estimate of $6,407 million.
2. T-Mobile US, Inc. (TMUS - Free Report) reported impressive second-quarter 2021 results, wherein both the bottom line and the top line beat the Zacks Consensus Estimate. This Bellevue, WA-based wireless carrier witnessed industry-leading postpaid net additions and record service revenues.
Net income in the June quarter was $978 million or 78 cents per share compared with $110 million or 9 cents per share in the prior-year quarter. The improvement was primarily driven by service revenue growth and synergy realization. The bottom line beat the Zacks Consensus Estimate by 26 cents, delivering a surprise of 50%. Quarterly total revenues increased 12.9% year over year to $19,950 million, driven by customer growth and higher wholesale revenues. The top line surpassed the consensus estimate of $19,391 million.
3. Arista Networks, Inc. (ANET - Free Report) reported strong second-quarter 2021 results, wherein both the bottom and the top lines beat the respective Zacks Consensus Estimate, driven by a healthy momentum in the enterprise vertical and solid customer additions. Adjusted earnings and revenues also improved significantly year over year.
Excluding non-recurring items, non-GAAP net income was record high at $216.8 million or $2.72 per share compared with $167 million or $2.11 per share in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by 17 cents. Quarterly total revenues jumped 30.8% year over year to $707.3 million and were well ahead of the company’s guidance of $675-$695 million. The rise was primarily led by solid customer additions and growth in the enterprise vertical, partially offset by shipment constraints resulting from the COVID-19 operating environment and supply-chain disruptions. The top line surpassed the consensus estimate of $687 million.
4. Plantronics, Inc. reported healthy first-quarter fiscal 2022 results, wherein both the bottom line and the top line beat the respective Zacks Consensus Estimate. Despite supply-chain adversities due to the global semiconductor chip shortage, Poly (the name under which Plantronics markets itself) recorded solid top-line growth backed by diligent execution of operational plans.
Non-GAAP net income came in at $26.5 million or 60 cents per share compared with $13.3 million or 33 cents per share in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by 14 cents, delivering a surprise of 30.4%. Quarterly total GAAP revenues grew 21.2% year over year to $431.2 million. Non-GAAP revenues were $432.4 million, up from $360.8 million and exceeded the consensus estimate of $418 million. The growth was primarily driven by video, which nearly doubled to $138 million from $71 million, and voice products, which increased to $61 million from $46 million. This reflects the massive shift toward reliable, high-fidelity solutions for hybrid work and video collaboration.
5. TELUS Corporation (TU - Free Report) reported impressive second-quarter 2021 results, wherein the bottom line matched the Zacks Consensus Estimate while the top line surpassed the same. Diligent operational execution, expanded service offerings, new customer wins, higher PureFibre network adoption and accelerated broadband network investment program boosted TELUS’ quarterly results.
Quarterly adjusted net income was C$348 million or C$0.26 per share ($283.3 million or 21 cents per share) compared with C$316 million or C$0.25 per share in the prior-year quarter. The bottom line matched the Zacks Consensus Estimate. Encouraged by its business resiliency post the COVID-19 mayhem, quarterly total operating revenues jumped 10.3% year over year to C$4,111 million ($3,347 million). The growth reflects higher demand for premium bundled services that resulted in 223,000 new customer additions in the reported quarter. The top line surpassed the consensus estimate of $3,282 million.
Price Performance
The following table shows the price movement of some of the major telecom stocks over the past week and six months.
Image Source: Zacks Investment Research
In the past five trading days, Juniper has been the best performer with the stock gaining 5.5%, while Bandwidth declined the most with its stock falling 3.2%.
Over the past six months, Motorola has been the best performer with its stock appreciating 18.1%, while Bandwidth declined the most with its stock falling 45.3%.
Over the past six months, the Zacks Telecommunications Services industry has gained 11.5% and the S&P 500 has rallied 15.1%.
Image Source: Zacks Investment Research
What’s Next in the Telecom Space?
In addition to 5G deployments and product launches, all eyes will remain glued to how the rest of the telecom stocks fare in the quarterly earnings, with the administration continuing to implement key policy changes to safeguard the interests of the industry.
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Telecom Stock Roundup: Nokia, T-Mobile Surpass Q2 Earnings Estimates & More
U.S. telecom stocks traded relatively flat on average over the past week amid fears of resurgence of coronavirus cases with the spread of the Delta variant, and speculations of protracted economic recovery owing to mounting inflationary pressures. The uptick in infections and imposition of fresh restrictions in several parts of Asia and Europe threatened to derail the global economic revival. The virus even endangered the progress of the infrastructure bill in the Senate as key Senators were bugged by the new variant of the contagious disease, casting a doubt about the timely advancement of an already delayed bill. However, continued administrative efforts to set up guardrails and legislation to safeguard the interests of domestic firms appeared to offer a cushion to the beleaguered industry. In addition, better-than-expected earnings results from hitherto reported companies appeared to spur optimism and offset the doom and gloom in the industry.
The multi-billion infrastructure bill that was recently passed by the Senate after months of painstaking negotiations hit a stumbling block with surge in COVID-19 cases by the fast-spreading Delta variant. The bill includes a $65 billion provision to significantly expand broadband access to Americans, as the administration aims to fortify its technological prowess to thwart the dominance of countries like China. The plan envisions reaching the underserved areas of the country and prioritizing support for broadband networks affiliated with local governments, nonprofit organizations and cooperatives to encourage strong competition with privately-owned companies. The plan has also earmarked funds for the tribal areas that lack access to high-speed Internet. It is likely to lower the prices for Internet services by requiring funding recipients to offer a low-cost affordable plan and encourage price transparency. The timely passage of the bill could have worked wonders for the industry reeling under supply chain disruptions and demand-supply imbalance.
The industry received a boost when the Senate Commerce Committee approved the "Secure Equipment Act of 2021", aimed at strengthening the approval guidelines for communication products from foreign firms. The overwhelming bipartisan support paved the passage of the bill to the next stage and is likely to secure a vote on the Senate floor in the near future.
Regarding company-specific news, quarterly earnings primarily took the center stage over the past five trading days.
Recap of the Week’s Most Important Stories
1. Nokia Corporation (NOK - Free Report) reported healthy second-quarter 2021 results, wherein the bottom line beat the Zacks Consensus Estimate. Focus on capital allocation and technology leadership in 2021 is expected to aid it to grow profitably in 2022 and beyond.
Comparable profit came in at €532 million ($641 million) or €0.09 (11 cents) per share, up from €311 million or €0.06 per share in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by 5 cents. On a constant currency basis, quarterly net sales grew 9% year over year to €5,313 million ($6,401 million). This was driven by growth across all business groups, with particular strength in Network Infrastructure. Reported net sales increased 4.3%. The top line marginally missed the consensus estimate of $6,407 million.
2. T-Mobile US, Inc. (TMUS - Free Report) reported impressive second-quarter 2021 results, wherein both the bottom line and the top line beat the Zacks Consensus Estimate. This Bellevue, WA-based wireless carrier witnessed industry-leading postpaid net additions and record service revenues.
Net income in the June quarter was $978 million or 78 cents per share compared with $110 million or 9 cents per share in the prior-year quarter. The improvement was primarily driven by service revenue growth and synergy realization. The bottom line beat the Zacks Consensus Estimate by 26 cents, delivering a surprise of 50%. Quarterly total revenues increased 12.9% year over year to $19,950 million, driven by customer growth and higher wholesale revenues. The top line surpassed the consensus estimate of $19,391 million.
3. Arista Networks, Inc. (ANET - Free Report) reported strong second-quarter 2021 results, wherein both the bottom and the top lines beat the respective Zacks Consensus Estimate, driven by a healthy momentum in the enterprise vertical and solid customer additions. Adjusted earnings and revenues also improved significantly year over year.
Excluding non-recurring items, non-GAAP net income was record high at $216.8 million or $2.72 per share compared with $167 million or $2.11 per share in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by 17 cents. Quarterly total revenues jumped 30.8% year over year to $707.3 million and were well ahead of the company’s guidance of $675-$695 million. The rise was primarily led by solid customer additions and growth in the enterprise vertical, partially offset by shipment constraints resulting from the COVID-19 operating environment and supply-chain disruptions. The top line surpassed the consensus estimate of $687 million.
4. Plantronics, Inc. reported healthy first-quarter fiscal 2022 results, wherein both the bottom line and the top line beat the respective Zacks Consensus Estimate. Despite supply-chain adversities due to the global semiconductor chip shortage, Poly (the name under which Plantronics markets itself) recorded solid top-line growth backed by diligent execution of operational plans.
Non-GAAP net income came in at $26.5 million or 60 cents per share compared with $13.3 million or 33 cents per share in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by 14 cents, delivering a surprise of 30.4%. Quarterly total GAAP revenues grew 21.2% year over year to $431.2 million. Non-GAAP revenues were $432.4 million, up from $360.8 million and exceeded the consensus estimate of $418 million. The growth was primarily driven by video, which nearly doubled to $138 million from $71 million, and voice products, which increased to $61 million from $46 million. This reflects the massive shift toward reliable, high-fidelity solutions for hybrid work and video collaboration.
5. TELUS Corporation (TU - Free Report) reported impressive second-quarter 2021 results, wherein the bottom line matched the Zacks Consensus Estimate while the top line surpassed the same. Diligent operational execution, expanded service offerings, new customer wins, higher PureFibre network adoption and accelerated broadband network investment program boosted TELUS’ quarterly results.
Quarterly adjusted net income was C$348 million or C$0.26 per share ($283.3 million or 21 cents per share) compared with C$316 million or C$0.25 per share in the prior-year quarter. The bottom line matched the Zacks Consensus Estimate. Encouraged by its business resiliency post the COVID-19 mayhem, quarterly total operating revenues jumped 10.3% year over year to C$4,111 million ($3,347 million). The growth reflects higher demand for premium bundled services that resulted in 223,000 new customer additions in the reported quarter. The top line surpassed the consensus estimate of $3,282 million.
Price Performance
The following table shows the price movement of some of the major telecom stocks over the past week and six months.
Image Source: Zacks Investment Research
In the past five trading days, Juniper has been the best performer with the stock gaining 5.5%, while Bandwidth declined the most with its stock falling 3.2%.
Over the past six months, Motorola has been the best performer with its stock appreciating 18.1%, while Bandwidth declined the most with its stock falling 45.3%.
Over the past six months, the Zacks Telecommunications Services industry has gained 11.5% and the S&P 500 has rallied 15.1%.
Image Source: Zacks Investment Research
What’s Next in the Telecom Space?
In addition to 5G deployments and product launches, all eyes will remain glued to how the rest of the telecom stocks fare in the quarterly earnings, with the administration continuing to implement key policy changes to safeguard the interests of the industry.