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Telephone and Data Systems (TDS) Q2 Earnings: What's Up?

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Telephone and Data Systems Inc. (TDS - Free Report) , a leading regional wireline voice and video service provider in the U.S., is slated to report second-quarter 2017 results on Aug 4, before market opens.

Last quarter, the company posted a remarkable positive earnings surprise of 3200.00%. Moreover, earnings surpassed the Zacks Consensus Estimate in two of the last four quarters, with an average positive surprise of 802.41%.

The price performance of Telephone and Data Systems was impressive for the last three months. The stock returned 10.7% against the 8% gain of its industry.

Let’s see how things are shaping up for this announcement.

Factors at Play

Telephone and Data Systems continues to compete with the likes of CenturyLink Inc. (CTL - Free Report) and Frontier Communications Corp. (FTR - Free Report) , to name a few. The company’s wireless division – United States Cellular Corp. – also operates in an intensely competitive wireless market and remains significantly challenged by the offering of service plans from lower-cost mobile operators.

Roaming revenue woes, costs of network integration and construction of new cell sites, aggressive equipment pricing, wireless technology upgrades and spectrum licensing will have a negative effect on the company’s finances.

However, Telephone and Data Systems’ efforts to reward its shareholders with a second-quarter 2017 dividend of 15.5 cents per Common Share and Series A Common Share are impressive. The dividend was paid on Jun 30, 2017, to shareholders of record as of Jun 16, 2017.

The company is experiencing strong smartphone demand at its wireless wing – U.S. Cellular. We believe the long-term higher ARPU from smartphone users and full utilization of LTE network capacity on the back of migration of customers from 3G to 4G networks are expected to mitigate the operating cost headwinds arising from higher subsidies on smartphones.

Telephone and Data Systems is striving hard to expand its business in the managed hosting and cloud service market. Launch of Shared Data plans for consumers and businesses at nominal prices have helped it gain consumers. The company's IPTV is also doing considerably well.

Earnings Whispers

Our proven model does not conclusively show that Telephone and Data Systems is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.

Zacks ESP: Telephone and Data Systems has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 5 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The Company has a Zacks Rank #3, which increases the predictive power of ESP. However, the company’s 0.00% ESP makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stock to Consider

BCE, Inc. (BCE - Free Report) from the broader Utilities sector has the right combination of elements to post an earnings beat when it will report second-quarter 2017 results on Aug 03. The company has an Earnings ESP of +2.99% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

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