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4 Telecom Stocks Likely to Surpass Q4 Earnings Estimates

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The U.S. telecommunications industry is apparently on the cusp of a digital revolution with leading carriers increasingly deploying 5G technology in select cities across the country and aiming for a nationwide rollout in the near future. Sweeping government reforms and a historic merger approval were the other hallmarks in the fourth quarter that reshaped the sector dynamics to weed off the uncertainty triggered by the prolonged trade war.  

The industry faced a gamut of trade restrictions and tariffs that affected its supply-chain mechanism and dented profitability. The Sino-U.S. tariff war virtually led to intense technology warfare between the two superpowers of the global economy, forcing the industry to get polarized into two halves, bringing an element of uncertainty within the rank and files of the telecom sector.

Factors at Play: 5G Wave

5G is billed as the technology of the future with faster download speed and seamless transfer of data. Leveraging state-of-the-art communication network architectures, 5G is touted to be the primary catalyst for next-generation IoT services. These include connected cars coupled with augmented reality and virtual reality platform, smart cities and connected devices that revolutionize key industry verticals.

Superfast 5G mobile networks will be of utmost necessity in managing the exponential growth of IoT. Moreover, 5G technology is likely to augment the scalability, security and universal mobility of the telecommunications industry, which is expected to propel the wide proliferation of IoT. According to data from research firm, IHS Markit, 5G is expected to enable $13.2 trillion of global economic output by 2035. Consequently, U.S. telecom firms are moving ahead with steady investments to upgrade the networks with state-of-the-art technology for faster 5G deployment.

Sweeping Reforms

In a landmark decision, the Federal Communications Commission (“FCC”) voted unanimously in favor of splitting the spectrum block earmarked for auto safety for use by wireless devices to meet the exponential growth of bandwidth due to increased 5G deployment. The plan seeks to allocate 45 MHz for Wi-Fi use and set aside the remaining 30 MHz for auto safety. The allocation is based on the perceived importance of Wi-Fi, which is likely to double by 2023 to more than $1 trillion, according to FCC Chairman Ajit Pai. Out of the 30 MHz spectrum band assigned for auto safety, 20 MHz will be allotted for a newer version of vehicle-to-everything communications or V2X technology, known as cellular vehicle-to-everything or C-V2X, and the remainder for the legacy DSRC safety system.

The Senate passed the anti-robocall bill, paving the way for the President to formally sign it into a law. Dubbed the TRACED Act, for Telephone Robocall Abuse Criminal Enforcement and Deterrence, the bill mandates telecom firms to offer free call-blocking apps to thwart spam calls. The Senate also passed the Broadband Deployment Accuracy and Technological Availability (DATA) Act that enables the FCC to collect more precise data from wired, fixed wireless, and satellite broadband providers to get a better understanding of the nationwide broadband coverage. This is likely to bridge the urban-rural digital divide and foster the development of high-speed Internet connectivity across the country.

Industry Consolidation

The U.S. Department of Justice finally gave green signal to the merger of T-Mobile with Sprint – the third and the fourth-largest wireless companies in the country. Allaying antitrust concerns, the authorities observed that the merger would create an entity that would thwart the dominance of China in the 5G market and benefit the larger community with superior rural broadband coverage. In addition, a $5-billion deal with Dish Network for divesting Sprint’s prepaid wireless businesses, including Boost Mobile, and some of its spectrum cleared the decks for the formation of a new entity. The agreement established Dish as a disruptive force in the wireless industry, redefining the broader industry metrics.

How to Pick?

A multitude of telecom stocks are likely to report earnings in the coming weeks. Solid earnings results of the telecom sector could sow the seeds for future investments in network and 5G-enabled devices for superior 5G readiness.

Amid a diverse range of companies, picking the right stock for your portfolio could appear to be a colossal task. While it is impossible to be sure about such outperformers, our proprietary methodology makes the choice fairly simple.

Our research shows that for stocks with the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), chances of a positive earnings surprise are as huge as 70%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP is an important ingredient of our proven model, which along with a top Zacks Rank creates the perfect combination to determine stocks with the best chances to pull off a positive surprise in the upcoming earnings announcements. It is the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate.

Potential Winners

Arista Networks, Inc. (ANET - Free Report) : Santa Clara, CA-based Arista is engaged in providing cloud networking solutions for data centers and cloud computing environments.

This Zacks Rank #3 stock has an Earnings ESP of +2.72%. The company is scheduled to report results after market close on Feb 13.

Arista Networks, Inc. Price and EPS Surprise

 

Arista Networks, Inc. Price and EPS Surprise

Arista Networks, Inc. price-eps-surprise | Arista Networks, Inc. Quote

Viavi Solutions Inc. VIAV: Headquartered in San Jose, CA, Viavi is a leading provider of network test, monitoring and service enablement solutions to diverse sectors across the globe.  

Viavi currently carries a Zacks Rank #3 and has an Earnings ESP of +1.06%. The company is slated to report results after the closing bell on Feb 4.

Viavi Solutions Inc. Price and EPS Surprise

 

Viavi Solutions Inc. Price and EPS Surprise

Viavi Solutions Inc. price-eps-surprise | Viavi Solutions Inc. Quote

Altice USA, Inc. ATUS: Headquartered in Long Island City, NY, Altice is one of the largest broadband communications and video services providers in the United States.

The company is slated to report results after market close on Feb 12. The stock currently has an Earnings ESP of +11.11% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Altice USA, Inc. Price and EPS Surprise

 

Altice USA, Inc. Price and EPS Surprise

Altice USA, Inc. price-eps-surprise | Altice USA, Inc. Quote

T-Mobile US, Inc. TMUS: Headquartered in Bellevue, WA, T-Mobile US, Inc. is a national wireless service provider, offering mobile voice, messaging, and data services in the postpaid, prepaid and wholesale markets.

This Zacks Rank #3 stock has an Earnings ESP of +1.39%. The company is set to report results on Feb 6.

T-Mobile US, Inc. Price and EPS Surprise

T-Mobile US, Inc. Price and EPS Surprise

T-Mobile US, Inc. price-eps-surprise | T-Mobile US, Inc. Quote

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