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Telephone and Data Systems (TDS) Up 2.1% Since Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Telephone and Data Systems, Inc. (TDS - Free Report) . Shares have added about 2.1% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is TDS due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Telephone and Data Systems Q1 Earnings Beat Estimates

Telephone and Data Systems reported mixed results for the first quarter of 2018.

Net income came in at $39 million or 34 cents per share compared with $37 million or 33 cents in the year-ago quarter, comfortably beating the Zacks Consensus Estimate of 18 cents.

Total operating revenues for the reported quarter were $1,225 million compared with $1,238 million in the prior-year quarter, missing the Zacks Consensus Estimate of $1,250 million.

United States Cellular Division

Quarterly total revenues from United States Cellular division were $942 million, up 1% year over year.

Total operating expenses decreased 1% year over year to $877 million. Operating income was $65 million compared with $54 million in the year-ago quarter.

TDS Division

In the reported quarter, total operating revenues came in at $231 million, up 1% year over year, primarily due to continued growth in the broadband product mix as well as in video connections.

Within the segment, revenues from wireline came in at $175 million, down 2% year over year, due to lower CLEC sales and decline in special access services.

Cable revenues were $56 million, reflecting an increase of 12%, primarily driven by growth in residential connections.

Cash Flow & Liquidity

During the first quarter, Telephone and Data Systems generated $214 million of cash from operations compared with $137 million in the year-ago quarter. As of Mar 31, 2018, free cash flow was $83 million compared with $10 million at the end of Mar 31, 2017. Net long-term debt at quarter end was $2,431 million with cash and cash equivalents of $779 million.

Guidance Reiterated

For full-year 2018, Telephone and Data Systems reiterated its earlier guidance and continues to expect total operating revenues in the range of $5,015-$5,265 million. Adjusted EBITDA is projected to be $1,075-$1,255 million while capital expenditure is estimated between $795 million and $845 million. The company projects adjusted OIBDA in the range of $925-$1,105 million.

The company accomplished a number of initiatives in the quarter operationally. It launched Voice over LTE in the Wisconsin market and readied networks in California, Oregon and Washington with VoLTE. Based upon the successful market test last year, TDS launched 4G fixed wireless services across most of its footprint.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. There have been two revisions higher for the current quarter compared to one lower.

VGM Scores

At this time, TDS has an average Growth Score of C, though it is lagging a bit on the momentum front with a D. The stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is more suitable for value investors than growth investors.

Outlook

Estimates have been broadly trending upward for the stock and the magnitude of these revisions looks promising. Interestingly, TDS has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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