A month has gone by since the last earnings report for Telephone & Data Systems (TDS - Free Report) . Shares have lost about 19.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is TDS due for a breakout? 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 Q2 Earnings & Revenues Miss Estimates
Telephone and Data Systems reported tepid second-quarter 2019 financial results, wherein both the bottom line and the top line missed the respective Zacks Consensus Estimate.
The parent of U.S. Cellular and TDS Telecom’s net income for the June quarter came in at $33 million or 28 cents per share compared with $33 million or 29 cents per share in the year-ago quarter. The bottom line missed the Zacks Consensus Estimate by 4 cents.
Quarterly total operating revenues were $1,261 million compared with $1,255 million in the prior-year quarter, driven by TDS Telecom’s improved customer results. The top line, however, lagged the consensus estimate of $1,288 million.
By segments, operating revenues from U.S. Cellular were $973 million, almost flat year over year. Total operating expenses increased to $943 million from $918 million. Operating income was $30 million compared with $56 million in the year-ago quarter. Postpaid average revenue per user improved to $45.90 from $44.74, while average revenue per account grew to $119.46 from $118.57.
Operating revenues were $233 million, up 1.3% year over year, reflecting healthy traction in broadband connections. Revenues from wireline were $172 million, down 1.1% due to lower ILEC sale as the company focused to pursue commercial fiber. Cable revenues were $62 million, reflecting an increase of 8.8%, primarily driven by growth in residential connections.
Cash Flow & Liquidity
During the first six months of 2019, Telephone and Data Systems generated $592 million of net cash from operating activities compared with $463 million in the year-ago period. Free cash flow (non-GAAP) for the same period totaled $199 million compared with $188 million in the prior-year period. As of Jun 30, 2019, the company had $834 million in cash and equivalents with $2,409 million of net long-term debt.
For full-year 2019, Telephone and Data Systems expects total operating revenues in the range of $5,025-$5,275 million. Adjusted EBITDA is projected to be $1,185-$1,365 million, while capital expenditure is estimated to be in the range of $940-$1,090 million. The company projects adjusted OIBDA in the band of $1,000-$1,180 million.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -9% due to these changes.
Currently, TDS has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, 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.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, TDS has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.