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Telephone and Data Systems (TDS) Q3 Earnings Top Estimates

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Telephone and Data Systems, Inc. (TDS - Free Report) reported healthy third-quarter 2018 results, primarily driven by U.S. Cellular’s increased revenues and profitability. Both the top line and the bottom line surpassed the respective Zacks Consensus Estimate in the quarter.

Net Income

Net income came in at $46 million or 41 cents per share against a loss of $181 million or loss of $1.64 per share in the year-ago quarter primarily due to lower total operating expenses. The bottom line beat the Zacks Consensus Estimate by 15 cents.

Telephone and Data Systems, Inc. Price, Consensus and EPS Surprise

Revenues

Quarterly total operating revenues were $1,297 million compared with $1,251 million in the prior-year quarter. The top line surpassed the consensus estimate of $1,288 million.

U.S. Cellular

Operating revenues from U.S. Cellular division were $1,001 million, up 3.9% year over year. Total operating expenses decreased 26.9% to $967 million. Operating income was $34 million against a loss of $360 million in the year-ago quarter mainly due to lower operating expenses.

TDS Telecom

Operating revenues were $234 million, up 1.7% year over year primarily driven by strong increases in broadband connections. Revenues from wireline were $177 million, down 1.1% year over year due to lower ILEC sale as the company refocused to pursue commercial fiber. Cable revenues were $58 million, reflecting an increase of 11.5%, primarily driven by growth in residential connections.

Cash Flow and Liquidity

In the first nine months of 2018, Telephone and Data Systems generated $812 million of cash from operating activities compared with $621 million in the year-ago period. Free cash flow (non-GAAP) for the first three quarters of the year totaled $365 million compared with $223 million in the prior-year period.

As of Sep 30, 2018, the company had $1,062 million as cash and cash equivalents with $2,422 million as net long-term debt.

Guidance

For full-year 2018, Telephone and Data Systems tweaked its earlier guidance. The company currently expects total operating revenues in the range of $5,080-$5,180 million compared with the earlier guidance of $5,055-$5,205 million. Adjusted EBITDA is projected to be $1,220-$1,325 million compared with the earlier guidance of $1,145-$1,275 million, while capital expenditure is estimated to be $770 million, down from the previous range of $790-$840 million. The company projects adjusted OIBDA in the range of $1,045-$1,125 million compared with the earlier guidance of $985-$1,115 million.

Zacks Rank and Other Stocks to Consider

Telephone and Data Systems currently carries a Zacks Rank #2 (Buy). Other top-ranked stocks in the broader industry include Ameren Corporation (AEE - Free Report) , American Electric Power Company, Inc. (AEP - Free Report) and Black Hills Corporation (BKH - Free Report) , each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Ameren has a long-term earnings growth expectation of 6.5%. It beat earnings estimates in each of the trailing four quarters, the average positive surprise being 15.4%.

American Electric Power has a long-term earnings growth expectation of 5.6%. It surpassed earnings estimates thrice in the trailing four quarters, the average positive surprise being 4.6%.     

Black Hills has a long-term earnings growth expectation of 4.5%.

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