Back to top

Telecom Stock Roundup: A Mixed Bag for Sprint, CenturyLink and Frontier Communications in Q2

Read MoreHide Full Article

Last week too, was all about earnings in the telecom sector. Several sector participants declared second-quarter 2017 financial numbers, and the results were a mixed bag.

National telecom operator Sprint Corp. (S - Free Report) reported mixed financial results in the first quarter of fiscal 2017 (ended 6/30/2017), wherein its bottom line outpaced the Zacks Consensus Estimate, while the top line missed the same. In the reported quarter, Sprint witnessed net additions of 61,000 wireless customers, including postpaid net losses of 39,000, prepaid net additions of 35,000, and wholesale and affiliate net additions of 65,000.

Regional telecom operator Frontier Communications Corp. (FTR - Free Report) reported mixed financial results in the second quarter of 2017. The company’s adjusted net loss was narrower than the Zacks Consensus Estimate while revenues lagged the same. As of Jun 30, 2017, the number of consumer segment phone customers decreased 11.6% year over year to 4,585,000. Commercial segment phone customers decreased 10.4%, year-over-year to 473,000. The company had 4,063,000 high-speed broadband subscribers, down 8.9% and 1,007,000 video customers, down 22.8% year over year.

Meanwhile, CenturyLink Inc. (CTL - Free Report) reported mixed financial results in the second quarter of 2017, wherein the bottom line fell short of the Zacks Consensus Estimate, while the top line beat the same. As of Jun 30, 2017, total access lines were 10.733 million, down 5.95% year over year. High-speed broadband customer count was 5.868 million, down 2.03%.  CenturyLink currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

On the other hand, Level 3 Communications Inc.  (LVLT - Free Report) reported impressive financial results for the second quarter of 2017. Both the bottom line and top line beat the Zacks Consensus Estimate. Notably, Level 3 Communications and CenturyLink are currently waiting for regulatory approval for their proposed merger deal.

Outside the U.S., Spanish telecom giant, Telefonica S.A. (TEF - Free Report) , reported mixed financial results in the second quarter of 2017. The top line failed to meet the Zacks Consensus Estimate while the bottom line grew year over year. As of Jun 30, 2017, total customer access lines were around 341.3473 million, down 0.2% year over year.Mobile access increased 0.8% to 273.8866 million customers. Total internet and data access grew 0.3% to 21.6973 million users. Pay-TV access totaled 8.2749 million, down 1.7%. FTTx/cable access was 9.9605 million, up 18.9%. Broadband access was 21.2404 million, inching up 0.2%.

Chunghwa Telecom Co. Ltd. (CHT - Free Report) , the largest integrated telecom operator in Taiwan, announced disappointing financial results in the second quarter of 2017. Both net earnings and revenues declined year over year. As of Jun 30, 2017, total broadband subscriber base was over 4.48 million, of which FTTx subscriber base accounted for 78.8%, with around 3.53 million subscribers.Mobile subscriber base was 10.72 million, down 1.4% year over year.The fixed-line subscriber base was 10.83 million.

Read the last Telecom Stock Roundup for Jul 28, 2017.

Recap of the Week’s Most Important Stories

1.    Sprint's first-quarter 2017 net income was $206 million or 5 cents per share compared with a net loss of $302 million or 8 cents in the year-ago quarter. Moreover, first-quarter net income of 5 cents compared favorably with the Zacks Consensus Estimate of a loss of a penny. Quarterly total revenue came in at $8,157 million, up 1.81% year over year but below the Zacks Consensus Estimate of $8,191 million.  (Read more:  Sprint Betters Estimates in Q1 Earnings, Revenues Miss)

2.    CenturyLink's net income in second-quarter 2017 was $17 million or 3 cents per share, compared to $196 million or 36 cents per share, in second-quarter 2016. Adjusted earnings per share (EPS) of 46 cents missed the Zacks Consensus Estimate of 49 cents. Total revenue for second quarter 2017 was $4,090 million compared with $4,398 million in second quarter 2016. However, the top line surpassed the Zacks Consensus Estimate of $4,085 million.  (Read more:  CenturyLink Q2 Earnings Lag, Revenues Top Estimates)

3.    On a GAAP basis, net income of Level 3 Communications in the reported quarter was $154 million or 42 cents per share compared with $156 million or 44 cents per share in the year-ago quarter. However, quarterly adjusted earnings per share (EPS) of 42 cents missed the Zacks Consensus Estimate of 39 cents. Second-quarter 2017 total revenue was $2,061 million, up 0.24% year over year and above the Zacks Consensus Estimate of $2,059.5 million.  (Read more:  Level 3 Communications Q2 Earnings & Revenues Top)

4.    On a GAAP basis, net loss of Frontier Communications in the reported quarter was $715 million or $9.21 per share compared with a net loss of $80 million or $1.05 per share in the prior-year quarter. However, quarterly adjusted (excluding special items) loss per share was $1.10, narrower than the Zacks Consensus Estimate of a loss of $1.12. Total revenue decreased 11.7% year over year to $2,304 million, lagging the Zacks Consensus Estimate of $2308.7 million.  (Read more: Frontier Communications Q2 Loss Narrower than Expected)

5.    Telefonica’s Quarterly net income was €821 million (approximately $902 million), up 18.4% year over year. Moreover, second-quarter earnings per ADR (American Depository Receipt) came in at 16 cents, up 6.7% year over year. The company recorded total revenue of €12,960 million (roughly $14,241 million) in the reported quarter, up 1.9% year over year. However, the figure missed the Zacks Consensus Estimate of $15,010 million. (Read more:  Telefonica Q2 Earnings Up Y/Y, Revenues 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

6.93%

-0.76%

T

0.08%

-7.22%

S

0.46%

4.27%

TMUS

2.03%

3.70%

CHTR

6.50%

17.29%

TEF

1.34%

17.18%

AMX

-1.28%

41.57%

CMCSA

0.25%

6.32%

DISH

2.14%

3.48%

In the last five trading sessions, share price movement of major telecom stocks was positive barring America Movil. Verizon (6.93%) and Charter Communications (6.50%) gained significantly in this time frame. Likewise, 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 (41.57%), Charter Communications (17.29%) andTelefonica (17.18%).

What’s Next in the Telecom Space?

We expect a busy week ahead for the telecom sector as several sector participants like DISH Network, Windstream Holdings, Cincinnati Bell, BCE Inc., Telephone and Data Systems, United States Cellular, Liberty Global and Cable ONE will release quarterly financial results. The market will closely evaluate these results in order to assess industry dynamics and future growth prospects.

More Stock News: Tech Opportunity Worth $386 Billion in 2017

From driverless cars to artificial intelligence, we've seen an unsurpassed growth of high-tech products in recent months. Yesterday's science-fiction is becoming today's reality. Despite all the innovation, there is a single component no tech company can survive without. Demand for this critical device will reach $387 billion this year alone, and it's likely to grow even faster in the future.

Zacks has released a brand-new Special Report to help you take advantage of this exciting investment opportunity. Most importantly, it reveals 4 stocks with massive profit potential. See these stocks now>>



More from Zacks Analyst Blog

You May Like