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Telecom Stock Roundup: AT&T, Verizon, Comcast and American Tower Post Strong Q2 Results

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The telecom industry experienced a strong run on the bourse last week as most of the key stocks traded in the green. On the earnings front, U.S. telecom behemoths AT&T Inc. (T - Free Report) and Verizon Communications Inc. (VZ - Free Report) along with, largest cable MSO (multi service operator) Comcast Corp. (CMCSA - Free Report) and leading wireless tower operator American Tower Corp. (AMT - Free Report) reported strong financial results in the second quarter of 2017.

In contrast, cable MSO Charter Communications Inc. (CHTR - Free Report) reported disappointing second quarter results while Canadian telecom giant Rogers Communications Inc. (RCI - Free Report) and Brazilian wireless operator Telefonica Brasil SA (VIV - Free Report) posted a mixed bag.

In the reported quarter, AT&T gained net 36,000 postpaid wireless customers and 2.170 million connected devices for Business Solutions division. It gained a net of 267,000 prepaid customers, 91,000 postpaid wireless customers and lost a net of 277,000 resellers and connected devices subscribers for the Consumer Mobility division. In the reported quarter, AT&T lost 195,000 U-verse customers and 156 satellite TV customers and gained 152 DIRECTV NOW connections. Total broadband connections were 14.302 million, up 0.85% year over year. Total wireline voice connections were 10.696 million, down 9.47%.

As of Jun 30, 2017, Verizon had 112.536 million retail subscribers, up 1.2% year over year. Of the total, retail postpaid subscriber count was 109.088 million, up 1.2%. Meanwhile, retail prepaid user count was 5.448 million, up 1.4%. In the reported quarter, the company gained 0.614 million postpaid customers and 0.019 million prepaid customers. During the quarter, the company lost 15,000 FiOS video subscribers while gaining 22,000 FiOS digital voice residential connections and 49,000 FiOS internet subscribers.High-speed internet connection dropped 17.6% year over year to 1.251 million and total retail residence voice connections declined 7.3% to 7.079 million.

Meanwhile, Comcast added a net of 175,000 high-speed internet customers but lost 34,000 video customers and 22,000 voice customers in the second quarter. The company also gained 8,000 double-play subscribers and 70,000 single-play subscribers in the reported quarter. Comcast currently carries a Zacks Rank #3 (Hold).You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

In the second-quarter of 2017, the Board of Directors of American Tower declared a cash distribution of 64 cents per share to its common stockholders of record as of the closure of business on Jun 19, 2017, payable in the in the third quarter of 2017. In addition, the company paid $27 million in preferred stock dividends during the quarter under review. In the said quarter, all outstanding shares of the company’s 5.25% Mandatory Convertible Preferred Stock, Series A were converted into 5.6 million shares of its common stock.

As of Jun 30, 2017, Charter Communications’ residential high-speed internet subscribers rose by 231,000 to 22.033 million. Voice subscribers grew 14,000 to 10.378 million. However, video subscribers decreased by 90,000 to 16.646 million. It also had 425,000 video, 1,285,000 high-speed internet and 847,000 voice subscribers. During the reported quarter, the company added 14,000 video customers, 36,000 high-speed internet and 38,000 voice customers.

As of Jun 30, Rogers Communications’ postpaid wireless subscriber base totaled 8.710 million. In the second quarter, the company added 93,000 postpaid wireless subscribers.The high-speed internet subscriber count was 2.186 million. The company added 11,000 high-speed internet customers in the quarter. Video subscriber base totaled 1.771 million, after a loss of 25,000 users. Telephony subscriber count was 1.098 million. The company lost 2,000 telephony subscribers in the reported quarter.

For Telefonica SA, as of Jun 30, 2017, total fixed access lines were 23.250 million, reflecting a decrease of 2.1% year-over-year. Fixed Broadband customers were 7.435 million, up 2.6% year over year. Fixed voice lines were 14.168 million, down 3.9% year over year. The Pay-TV subscriber base declined 6.5% year over year to 1.647 million.

Read the last Telecom Stock Roundup for Jul 20, 2017.

Recap of the Week’s Most Important Stories

1.    On a GAAP basis, AT&T reported net income of $4,014 million or 79 cents per share, compared with $3,515 million or 72 cents in the year-ago quarter. Quarterly adjusted (excluding non-recurring items) earnings per share came in at 79 cents, outshining the Zacks Consensus Estimate of 74 cents.Quarterly total revenue dropped 1.68% year over year to $39,837 million. However, this figure was above the Zacks Consensus Estimate of $39,799 million. (Read more: AT&T Tops Q2 Earnings & Revenues, Gains Subscribers)

2.    Quarterly GAAP net income of Verizon was $4,478 million or $1.07 per share compared with $831 million or 17 cents per share in the year-ago quarter. Adjusted earnings per share came in at 96 cents in the reported quarter, in line with the Zacks Consensus Estimate. Total revenue increased 0.1% year over year to $30,548 million beating the Zacks Consensus Estimate of $29,907 million. (Read more: Verizon Q2 Earnings In Line, Revenues Beat Estimates)

3.     GAAP net income of Comcast came in at $2,513 million or 52 cents per share compared with $2,028 million or 41 cents in the prior-year quarter. Quarterly earnings per share of 52 cents outpaced the Zacks Consensus Estimate of 48 cents. Total revenue was $21,165 million, up 9.8% year over year and ahead of the Zacks Consensus Estimate of $20,816 million. (Read more: Comcast Q2 Earnings and Revenues Surpass Estimates)

4.      American Tower's quarterly adjusted Funds from Operations (AFFO) per share were $1.68, up 21.74% from the year-ago quarter. Moreover, the AFFO per share of $1.68 surpassed the Zacks Consensus Estimate of $1.55. Total revenue of $1,662.4 million increased 15.3% year over year, outpacing the Zacks Consensus Estimate of $1,644.6 million. (Read more: American Tower Tops Earnings & Revenue Estimates in Q2)

5.     GAAP net income of Charter Communications in the reported quarter was $139 million compared with net income of $3,067 million in the year-ago quarter. Quarterly earnings per share of 52 cents per share were well below the Zacks Consensus Estimate of 81 cents. Ttotal revenue of $10,357 million increased 3.9% year over year but missed the Zacks Consensus Estimate of $10,388 million. (Read more: Charter Communications Q2 Earnings Lag Estimates)

Price Performance

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

Company

Last Week

Last 6 Months

VZ

6.51%

-3.16%

T

6.67%

-5.76%

S

-7.09%

-10.00%

TMUS

0.60%

0.80%

CHTR

5.62%

12.96%

TEF

4.38%

19.29%

AMX

1.62%

37.51%

CMCSA

-1.21%

4.67%

DISH

-1.89%

7.65%

In the last five trading sessions, share price movement of most of major telecom stocks was positive. AT&T (6.67%), Verizon (6.51%), Charter Communications (5.62%) and Telefonica (4.38%) gained significantly in this time frame. Similarly, the price performances of most of the major telecom stocks were positivein the last six months. Among the stocks that gained substantially are America Movil (37.51%), Telefonica (19.29%) and Charter Communications (12.96%). In contrast, Sprint (10.00%) lost significantly.

What’s Next in the Telecom Space?

We expect a busy week ahead for the telecom sector as several large sector participants like Sprint, Frontier Communications, CenturyLink and Level 3 Communications will release quarterly financial results. The market will closely evaluate these results in order to assess industry dynamics and future growth prospects.

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