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Telecom Stock Roundup: Qualcomm Earnings, Nokia-TMUS Deal & More

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In the last five trading days, telecom stocks continued their uptrend on the back of relatively healthy earnings season. The performance was propelled by solid sector earnings as most telecom firms managed to beat estimates. However, President Trump’s proposition to increase the quantum of tariffs against China proved to be a spoilsport at the end of the week.

Trump has proposed to increase tariffs on $200 billion worth of imports from the communist country from 10% to 25% as a punitive measure against its retaliatory tactics. The rhetoric further threatens to escalate the conflict by bringing into the tariff gambit the entire $500 billion worth of goods shipped from China to the U.S. shores. There seems to be no immediate respite to the lingering trade-related skirmish between the two countries, as China has vouched to counter every move to protect its own interests. Meanwhile, the anti-trust regulatory authorities of China have denied any wrongdoings as it failed to give its approval for Qualcomm Incorporated’s (QCOM - Free Report) acquisition of NXP Semiconductors within the stipulated time, although prima-facie it appeared to be a fallout of the continued trade war.             

Regarding company-specific news, quarterly earnings and breakaway deals for 5G technology embrace took the center stage over the last five trading days.

Recap of the Week’s Most Important Stories

1.    Qualcomm reported healthy third-quarter fiscal 2018 (ended Jun 24, 2018) results with solid performance in the licensing business and income tax benefits. Diligent execution of operational plans and stringent cost management efforts also contributed to the strong quarterly results.

Adjusted earnings were $1.01 per share compared with 83 cents in the year-earlier period. The bottom line comfortably surpassed the Zacks Consensus Estimate of 71 cents. Quarterly GAAP revenues of $5,599 million increased 4.2% year over year, largely due to an interim payment of $500 million from other licensees that were in dispute with the company. The top line surpassed the Zacks Consensus Estimate of $5,200 million. (Read more: Qualcomm Q3 Earnings, Revenues Beat, NXP Deal Aborted)

2.    Juniper Networks Inc. (JNPR - Free Report) reported relatively modest second-quarter 2018 results on the back of a solid performance from the cloud vertical and growth in enterprise business. Despite year-over-year decrease in earnings and revenues, the company beat the respective estimates and remains confident of returning to a growth trajectory by the end of the year.

Non-GAAP earnings for the reported quarter were $170.2 million or 48 cents per share compared with $220.5 million or 57 cents per share in the year-ago quarter owing to top-line woes. Non-GAAP earnings, however, beat the Zacks Consensus Estimate of 43 cents. Net revenues for the quarter were $1,204.1 million compared with $1,308.9 million in the prior-year period. The top line exceeded the Zacks Consensus Estimate of $1,172 million. (Read more: Juniper Trumps Q2 Earnings and Revenue Estimates)

3.    SBA Communications Corporation (SBAC - Free Report) reported lackluster second-quarter 2018 results, missing both top- and bottom-line estimates.

Driven by higher operating costs and adverse foreign currency translation, adjusted earnings for the quarter were a penny per share, which missed the Zacks Consensus Estimate of 18 cents. Total revenues increased 6.8% year over year to $456.3 million, missing the Zacks Consensus Estimate of $457 million. The top-line growth was supported by positive results in both domestic and international leasing operations as well as incremental contributions from services business. (Read more: SBA Communications Misses Q2 Earnings & Revenues)

4.    Harris Corporation (HRS - Free Report) reported solid fourth-quarter fiscal 2018 results, wherein both the top line and the bottom line surpassed the respective Zacks Consensus Estimate.

Fiscal fourth-quarter non-GAAP earnings from continuing operations were $1.78 per share compared with $1.49 in the year-earlier quarter, beating the Zacks Consensus Estimate of $1.76. Revenues for the reported quarter increased 8% year over year to $1,666 million, driven by growth in Communication Systems and Electronic Systems. The top line surpassed the Zacks Consensus Estimate of $1,618 million. Fiscal 2018 revenues increased 5% to $6,182 million. (Read more: Harris Surpasses Q4 Earnings and Revenue Estimates)

5.    In order to accelerate the deployment of 5G technology across the country, T-Mobile US, Inc. (TMUS - Free Report) inked a $3.5 billion agreement with Nokia Corporation (NOK - Free Report) to secure complete end-to-end 5G technology, software and services portfolio.

Per the contract, Nokia will supply relevant products and services to help build T-Mobile’s nationwide 5G network with 600 MHz and 28 GHz millimeter wave 5G capabilities compliant with 3GPP 5G New Radio standards. This would enable them to jointly develop, test and launch the next generation of 5G connectivity services across a wide range of industries, including enterprise, smart cities, utilities, transportation, health, manufacturing, retail, agriculture and government agencies.

Price Performance

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



In the last five trading days, Qualcomm and Harris were the major gainers with the share price increasing 7.7% each. Juniper was the major decliner with its stock losing 8.8%.

Over the last six months, Motorola Solutions, Inc. (MSI - Free Report) was the best performer with its stock appreciating 16.4% while AT&T Inc. (T - Free Report) declined the most with its shares falling 14.8%.

Over the last six months, the Zacks Telecommunications Services industry has recorded an average fall of 6.7% while the benchmark S&P 500 Index has gained 6.4%.



What’s Next in the Telecom Space?

In addition to continued product launches and deployment of 5G technologies, all eyes will remain glued to the earnings releases of various firms within the sector.

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