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Telecom Stock Roundup: Nokia, NETGEAR, Sprint Report Earnings & More

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In the past five trading days, telecom stocks experienced a downtrend for the bulk of the week and mirrored the broader S&P 500 Index, albeit with a relatively below-par performance. Broader sell-off, apprehension of a Fed hike in the imminent future and global macroeconomic woes seem to be the primary reasons for the decline as healthy corporate earnings failed to soothe investor nerves. In addition, the unrelenting trade war tensions with China appear to dent the long-term profitability of the telecom firms.

To add to the woes, the U.S. Commerce Department has issued a restraining order for domestic firms to stop selling key software and technology to China provincial government-owned Fujian Jinhua Integrated Circuit Co., citing national security threats. The trade restrictions, similar to the one imposed earlier on ZTE, is likely to harm the already strained ties between Washington and Beijing due to the ongoing trade war. The strategic move is further likely to affect the revenue-generating model of the U.S. telecom companies as China reportedly buys more computer chips than any other country in the world.  

The telecom industry, however, had something to cheer about in the past week when the Trump administration announced that the federal government is likely to issue the ‘national spectrum strategy’ by next summer to funnel unused airwaves to the private sector. Federal agencies are likely to assess the quantum of spectrum required to fulfill missions of national interests in the near future and share the remainder with cellphone carriers, technology companies and other emerging industries. The endeavor is likely to encourage higher deployment of 5G technology across the board to counter the massive investments by China in this field to gain an upper hand.
      
Regarding company-specific news, earnings, strategic collaborations and product launches took the center stage over the past five trading days.

Recap of the Week’s Most Important Stories

1.    Nokia Corporation (NOK - Free Report) delivered tepid financial results in third-quarter 2018 with year-over-year decrease in both non-IFRS top- and bottom-line numbers.

Reported loss for the third quarter improved 56.4% year over year to €79 million or loss of €0.01 per share, primarily due to decrease in R&D and other expenses. Non-IFRS profit declined 40.1% year over year to €309 million or €0.06 per share ($359.2 million or 7 cents per share), beating the Zacks Consensus Estimate of 6 cents. Non-IFRS net sales fell 1.4% to €5,461 million ($6,350 million), missing the Zacks Consensus Estimate of $6,562 million. (Read more: Nokia Beats Q3 Earnings Estimates, Falters on Revenues)

2.    NETGEAR, Inc. (NTGR - Free Report) reported healthy third-quarter 2018 financial results, driven by the success of Orbi, cable modems and gateways, SMB switches and the Arlo business.

Non-GAAP net income came in at $24.9 million or 76 cents per share compared with $26.2 million or 81 cents per share in the prior-year quarter, beating the Zacks Consensus Estimate of 47 cents. The company generated record quarterly net revenues of $400.6 million, up 12.7% year over year owing to growth across all three segments. The figure surpassed the Zacks Consensus Estimate of $389 million. (Read more: NETGEAR Tops Q3 Earnings Estimates on Record Revenues)

3.    Sprint Corporation (S - Free Report) reported solid second-quarter fiscal 2018 financial results, wherein both the top line and the bottom line surpassed the respective Zacks Consensus Estimate.

Quarterly net income came in at $196 million or 5 cents per share against a loss of $48 million or loss of 1 cent per share in the year-ago quarter, primarily driven by higher operating revenues and lower income tax expenses. The bottom line comfortably beat the Zacks Consensus Estimate of loss of 1 cent. Quarterly total net operating revenues increased to $8,433 million from $7,927 million in the year-ago quarter driven by higher wireless revenues. The top line surpassed the Zacks Consensus Estimate of $7,977 million. (Read more: Sprint’s Q2 Earnings Beat on Wireless Revenue Growth)

4.    AT&T Inc. (T - Free Report) has introduced seamless connectivity in Daimler Trucks North America beyond the continent to cover trucks built for the Australian and European markets.

The new multi-year agreements offer proprietary connected vehicle platforms and extend the strategic collaboration between the two firms to expand connectivity services and connected vehicle portfolio to more regions. This would help to introduce IoT connectivity in the long-haul trucking industry outside the core North American markets and is a win-win deal for both the companies.

5.    Ciena Corporation (CIEN - Free Report) has unveiled a comprehensive, cloud-based analytics-as-a-service offering titled Insights Service to provide greater visibility into network assets, service availability, network health and areas of risk.

This intelligent analytics service facilitates network providers and large enterprises to take actionable steps, forging a path to create more agile and adaptive networks, and better navigate the complex and unpredictable network demands. In addition, the new service offering complements its Blue Planet Analytics solution, which is deployed as on-premises software to enable closed-loop, multi-domain automation, to proactively fix potential issues before they impact services.

Price Performance

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

In the past five trading days, SBA Communications Corporation (SBAC - Free Report) was the biggest gainer, with its share price increasing 4.8%. Harris Corporation (HRS - Free Report) was the major decliner, with its stock losing 9.1%.

Over the past six months, QUALCOMM Incorporated (QCOM - Free Report) has been the best performer, with its stock appreciating 20.1% while AT&T declined the most, with its shares falling 4.5%.

Over the past six months, the Zacks Telecommunications Services industry recorded an average decline of 1.8% while the S&P 500 gained 2.9%.

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