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Telecom Stock Roundup: Comcast, T-Mobile US and Sprint Post Strong Q2, Mixed Bag for AT&T and Verizon

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Last week was all about earnings in the telecom sector. Several major sector participants revealed their second-quarter 2016 financial numbers.

National telecom carriers T-Mobile US Inc. (TMUS - Free Report) and Sprint Corp. (S - Free Report) along with cable MSO (multi service operator) Comcast Corp. (CMCSA - Free Report) reported strong financial results wherein both the top and the bottom line surpassed the respective Zacks Consensus Estimate.

T-Mobile US continues to gain postpaid wireless customers, which has encouraged management to raise the subscriber gain outlook for 2016. Sprint gained 180,000 postpaid subscribers and 528,000 wholesale customers, but lost 331,000 prepaid customers in the reported quarter. Comcast witnessed a significant drop in video customer loss and a massive increase in high-speed Internet and voice customer gain, year over year.

On the other hand, telecom behemoths Verizon Communications Inc. (VZ - Free Report) and AT&T Inc. (T - Free Report) posted mixed second-quarter 2016 results. Verizon’s top line missed the Zacks Consensus Estimate but the bottom line outpaced the same. AT&T’s top line also lagged the Zacks Consensus Estimate while the bottom line just met the same.

In the reported quarter, AT&T’s total video subscribers dropped by 49,000. AT&T added 342,000 DIRECTV subscribers, but lost 391,000 U-verse TV customers.The company’s Business Solutions wireless subscriber base was 77,545,000, up 12.1% whereas Consumer Mobility wireless subscriber base was 54,260,000, down 0.8%.

Meanwhile, Verizon recorded 113.154 million retail subscribers, up 3.3% year over year,at the end of the second quarter of 2016. Out of the total, retail postpaid subscriber count was 107.780 million, up 3.9% and retail prepaid user count was 5.374 million, down 7.6%.

Notably, in a major development, Verizon has entered into a definitive agreement with Yahoo! Inc. to acquire the latter’s operating business for approximately $4.83 billion.  Subject to customary closing conditions, approval by Yahoo's shareholders, and regulatory approvals, the deal is expected to close in the first quarter of 2017.

In more of earnings stories, satellite TV operator DISH Network Corp. (DISH - Free Report) declared mixed financial results in the second quarter of 2016. While the bottom line surpassed the Zacks Consensus Estimate, the top line lagged the same.The company lost a substantial 281,000 pay-TV subscribers in the reported quarter.

Leading wireless tower operator Crown Castle International Corp. (CCI - Free Report) reported strong financial numbers in the second quarter of 2016, wherein both the top and the bottom line outpaced the respective Zacks Consensus Estimate. However, communications service provider Level 3 Communications Inc. reported mixed financial results in the second quarter of 2016 wherein the top line missed the Zacks Consensus Estimate while the bottom line outpaced the same.

Outside the U.S., Rogers Communications Inc. (RCI - Free Report) , the largest telecom operator in Canada, declared mixed financial results in the second quarter of 2016, wherein the bottom line missed the Zacks Consensus Estimate but the top line surpassed the same.

Read the last Telecom Stock Roundup for Jul 14, 2016.

Recap of the Week’s Most Important Stories

1.    In the second quarter of 2016, T-Mobile US’ GAAP net income was $225 million or 25 cents per share compared with a net income of $361 million or earnings of 42 cents per share in the year-ago quarter. Quarterly earnings per share of 25 cents came in above the Zacks Consensus Estimate of 22 cents. Total revenue increased 12.7% year over year to $9,222 million in the second quarter, surpassing the Zacks Consensus Estimate of $9,041 million.   (read more: T-Mobile US Tops Q2 Earnings & Revenues, View Up.)

2.    GAAP net income of Comcast in the second quarter of 2016 came in at $2,028 million or 83 cents per share compared with $2,137 million or 84 cents per share in the prior-year quarter. However, the bottom line was a penny ahead of the Zacks Consensus Estimate. Quarterly total revenue was $19,269 million, up 2.8% year over year and ahead of the Zacks Consensus Estimate of $19,043 million.    (read more: Comcast Tops Q2 Earnings, Revenue Estimates.)

3.    Sprint’s quarterly net loss was $302 million or 8 cents per share, much wider than a net loss of $20 million or 1 cent per share in the year-ago quarter. However, first-quarter adjusted net loss per share of 6 cents was narrower than the Zacks Consensus Estimate of a loss of 8 cents. Quarterly total revenue came in at $8,012 million, down 0.2% year over year but ahead of the Zacks Consensus Estimate of $7,976 million.   (read more: Sprint Q1 Loss Narrower than Expected, Revenues Beat.)

4.    On a GAAP basis, AT&T reported net income of $3,408 million or 55 cents per share in comparison with $3,082 million or 59 cents per share in the year-ago quarter. Quarterly adjusted earnings per share came in at 72 cents, in line with the Zacks Consensus Estimate. Quarterly total revenue increased 22.7% year over year to $40,520 million, lagging the Zacks Consensus Estimate of $40,661 million.  (read more: AT&T Meets Q2 Earnings Estimates, Misses on Revenues.)

5.    Verizon’s adjusted earnings per share came in at 94 cents in the reported quarter. Quarterly GAAP net income was $831 million compared with $4,353 million in the year-ago quarter. Quarterly total revenue decreased 5.3% year over year to $30,532 million, missing the Zacks Consensus Estimate of $31,117 million.   (read more: Verizon's Mixed Q2: Beats Earnings, Revenues Lag.)

Price Performance

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

Company

Last Week

Last 6 Months

VZ

-0.95%

12.83%

T

-0.26%

20.52%

S

15.60%

98.29%

TMUS

2.77%

18.55%

VOD

1.53%

-1.52%

CHL

4.69%

16.63%

AMX

-3.04%

-9.71%

CMCSA

1.56%

25.50%

DISH

-0.27%

10.51%

Over the last five trading sessions, share price movement of the major telecom stocks witnessed a mixed trend. Apart from Sprint, which gained a considerable 15.60%, the other major telecom stocks witnessed minor gains or losses.

Over the last six months, the price performance of most of the telecom stocks was positive. Among the stocks that gained significantly were Sprint (98.29%), Comcast (25.50%), AT&T (20.52%), T-Mobile US (18.55%), China Mobile (16.63%), Verizon (12.83%) and DISH (10.51%).

What’s Next in the Telecom Sector?

We expect earnings releases to dominate proceedings in the telecom sector over the next week as large telecom carriers like American Tower, America Movil, Frontier Communications, CenturyLink, BCE Inc., TELUS and Windstream Holdings are lined up to report their second-quarter 2016 financial results. The market will closely watch these quarterly results in order to assess industry dynamics and growth prospects.

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