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United States Cellular (USM) Q2 Earnings: Surprise in Store?

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United States Cellular Corp. (USM - Free Report) , the wireless subsidiary of Telephone & Data Systems Inc. (TDS - Free Report) , is slated to report second-quarter 2017 results on Aug 4 before the opening bell.

Last quarter, the company delivered a positive earnings surprise of 63.64%. Moreover, the company’s earnings surpassed the Zacks Consensus Estimate in three of the previous four quarters, with an average positive surprise of 37.84%.

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

Factors at Play

United States Cellular operates in an intensely competitive wireless market and remains highly susceptible to aggressive pricing by larger rivals. On a regional level, the company competes with AT&T Inc. (T - Free Report) owned Leap Wireless.

High costs associated with network integration and construction of cell sites, aggressive equipment pricing, increasing capacity in existing cell sites, upgrading wireless technology and spectrum licensing are likely to negatively impact second-quarter results.

However, price performance of United States Cellular has been impressive over the last three months. The stock has returned 3.3% compared with the 1.6% gain of its industry.

United States Cellular’s strategic moves of introducing a new billing system, continuous rollout of 4G LTE, enhancement of LTE handsets, completion of various spectrum transactions and monetization of non-strategic assets look impressive. Decision to increase the amount of data available in its existing prepaid plans has added subscribers. The Shared Connect plans, which offer more data, larger allotments and unlimited offerings, also bode well.

Recently, to attract customers, United States Cellular has launched an online and in-store presale for the Moto Z2 Force Edition from Motorola. The offer includes unlimited data starting as low as $40 per line/month for four lines and many more additional perks.

Earnings Whispers

Our proven model does not conclusively show that United States Cellular 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: United States Cellular has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 14 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company holds a Zacks Rank #2, 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

Vishay Intertechnology, Inc. (VSH - Free Report) , from the broader Computer and Technology sector, has the right combination of elements to post an earnings beat when it expectedly reports second-quarter 2017 results on Aug 3. The company has an Earnings ESP of +6.06% and a Zacks Rank #2.

You can see the complete list of today’s Zacks #1 Rank stocks here.

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