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United States Cellular (USM) Q2 Earnings Beat, Guidance Up

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United States Cellular Corporation (USM - Free Report) reported impressive second-quarter 2018 results wherein both the top and the bottom line surpassed the respective Zacks Consensus Estimate.

Revenues

Quarterly total operating revenues increased 1% year over year to $974 million driven by growth in both its operating segments. The figure surpassed the Zacks Consensus Estimate of $961 million. While Service revenues of $741 million remained almost flat year over year, revenues from Equipment sales were up 5% to $233 million driven by more sales of higher-priced devices and accessories.

Net Income

Net income for the quarter improved to $49 million or 56 cents per share from $12 million or 14 cents per share in the year-ago quarter primarily due to lower operating expenses.

Adjusted earnings per share came in at 47 cents compared with 17 cents in the year-ago quarter. The bottom line comfortably beat the Zacks Consensus Estimate of 19 cents.

United States Cellular Corporation Price, Consensus and EPS Surprise

Other Quarter Details

Total operating expenses declined 4% year over year to $918 million. Operating income came in at $56 million compared with $5 million in the prior-year quarter.

While total cell sites in service were 6,478 at the quarter end compared with 6,473 in the prior-year quarter, company-owned towers were 4,105 compared with 4,099.

While quarterly postpaid ARPU (average revenue per user) increased to $44.74 from $44.60, postpaid ARPA (average revenue per account) was $118.57 compared with $119.73. Postpaid churn slightly rose to 1.19% from 1.13% in the year-ago period. Prepaid ARPU decreased to $32.32 from $33.52 and prepaid churn fell to 4.83% from 4.93%.

Cash Flow & Liquidity

For the first six months of 2018, cash from operations aggregated $365 million compared with $220 million in the year-ago period. Non-GAAP free cash flow for the first half of the year was $192 million compared with $65 million in the year-ago period.

As on Jun 30, 2018, United States Cellular had cash and cash equivalents of $596 million with net long-term debt of $1,614 million.

2018 Guidance Raised

For full-year 2018, United States Cellular raised guidance on the back of solid second-quarter results. It now expects total operating revenues in the band of $3,925-$4,025 million, up from previous range of $3,850-$4,050 million. Adjusted EBITDA is projected in the range of $850-$950 million, up from $765-$915 million expected earlier. The company anticipates adjusted OIBDA in the range of $700-$800 million, up from the previous guidance of $625-$775 million. Capital expenditures remain unchanged and is expected to be between $500 and $550 million.

Zacks Rank & Stocks to Consider

United States Cellular currently has a Zacks Rank #3 (Hold). Better-ranked stocks in the broader industry include Comtech Telecommunications Corp. (CMTL - Free Report) , Micron Technology, Inc. (MU - Free Report) and Motorola Solutions, Inc. (MSI - Free Report) . While Comtech and Micron sport a Zacks Rank #1 (Strong Buy), Motorola carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Comtech has a long-term earnings growth expectation of 5%. It beat earnings estimates in each of the trailing four quarters, the average being 123.7%.          

Micron has a long-term earnings growth expectation of 8.2%. It beat earnings estimates in each of the trailing four quarters, the average being 5.9%.   

Motorola has a long-term earnings growth expectation of 8.5%. It beat earnings estimates in each of the trailing four quarters, the average being 12.1%.   

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