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U.S. Cellular (USM) Beats on Q1 Earnings, Reiterates View
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United States Cellular Corporation (USM - Free Report) reported robust first-quarter 2020 financial results, with the top and the bottom line surpassing the Zacks Consensus. Accretive customer connections and churn rate mitigation strategies contributed to growth in service revenues.
Net Income
On a GAAP basis, net income in the March quarter was $71 million or 81 cents per share compared with $54 million or 62 cents per share in the year-ago quarter. The year-over-year improvement can be attributed to reduced income tax expenses. Backed by network modernization efforts, United States Cellular’s quarterly results reflect a significant tax benefit from the CARES (Coronavirus Aid, Relief, and Economic Security) Act, partially offset by higher levels of bad debts. The bottom line surpassed the Zacks Consensus Estimate by 31 cents.
United States Cellular Corporation Price, Consensus and EPS Surprise
Quarterly total operating revenues were relatively flat at $963 million and surpassed the consensus estimate of $957 million. While revenues from service increased 2.8% year over year to $762 million, the same from equipment sales declined 10.7% to $201 million as social distancing measures due to coronavirus fears led to retail store closures.
Other Details
Total operating expenses inched up 1.2% year over year to $913 million, primarily due to higher depreciation and amortization charges as well as SG&A expenses. Operating income was $50 million compared with $64 million in the prior-year quarter. In the first quarter, adjusted EBITDA came in at $281 million whereas adjusted OIBDA was $231 million.
Operating Metrics
While total cell sites in service were 6,629 at the end of the reported quarter compared with 6,506 a year ago, company-owned towers were 4,184 compared with 4,106. As of Mar 31, postpaid ARPU increased to $47.23 from $45.44 and postpaid ARPA (average revenue per account) rose to $122.92 from $118.84. Postpaid churn declined to 1.21% from 1.26% reported a year ago. Prepaid ARPU increased to $34.07 from $33.44 and prepaid churn fell to 4.67% from 4.92%.
Cash Flow & Liquidity
During the first three months of 2020, U.S. Cellular generated $342 million of net cash from operations compared with $287 million in the year-ago quarter. For the same period, the company’s non-GAAP free cash flow totaled $27 million compared with $180 million in the prior-year quarter.
As of Mar 31, 2020, the wireless telecommunications service provider had $258 million in cash and equivalents with $1,503 million of net long-term debt. Notably, U.S. Cellular repurchased 803,836 shares for $23 million in first-quarter 2020.
2020 Revenue Guidance Reiterated
Despite uncertainties pertaining to the coronavirus pandemic, U.S. Cellular has kept its revenue guidance for 2020 unchanged. The company continues to expect service revenues in the band of $3,000-$3,100 million. Adjusted EBITDA is projected in the range of $900-$1,025 million compared with previous expectation of $950-$1,075 million. The company anticipates adjusted OIBDA in the band of $725-$850 million compared with earlier expectations of $775-$900 million. Capital expenditures are expected between $850 million and $950 million.
Going Forward
U.S. Cellular continues to strengthen its customer base while improving churn management and enhancing brand positioning. With focus on the cost structure, the company has been making efforts to provide essential products and services. Markedly, the company witnessed a year-over-year rise of 59% in data traffic, thereby meeting increased network demands in this hour of crisis. U.S. Cellular’s supply chain and logistics were also in full swing where nearly 70% of its retail stores remained open in this pandemic. Progressing with 5G and network modernization initiatives, the company intends to attract new customers by providing superior quality network and national coverage. Due to the impact of COVID-19 pandemic, macroeconomic factors like unemployment and credit market downfall coupled with lower store traffic could negatively impact U.S. Cellular’s profitability.
InterDigital’s bottom line surpassed the Zacks Consensus Estimate thrice in the last four quarters. The company has a trailing four-quarter positive earnings surprise of 62%, on average.
Opera’s bottom line surpassed the Zacks Consensus Estimate twice in the last four quarters. The company has a trailing four-quarter positive earnings surprise of 192.9%, on average.
Radcom’s bottom line surpassed the Zacks Consensus Estimate thrice in the last four quarters. The company has a trailing four-quarter positive earnings surprise of 47.1%, on average.
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U.S. Cellular (USM) Beats on Q1 Earnings, Reiterates View
United States Cellular Corporation (USM - Free Report) reported robust first-quarter 2020 financial results, with the top and the bottom line surpassing the Zacks Consensus. Accretive customer connections and churn rate mitigation strategies contributed to growth in service revenues.
Net Income
On a GAAP basis, net income in the March quarter was $71 million or 81 cents per share compared with $54 million or 62 cents per share in the year-ago quarter. The year-over-year improvement can be attributed to reduced income tax expenses. Backed by network modernization efforts, United States Cellular’s quarterly results reflect a significant tax benefit from the CARES (Coronavirus Aid, Relief, and Economic Security) Act, partially offset by higher levels of bad debts. The bottom line surpassed the Zacks Consensus Estimate by 31 cents.
United States Cellular Corporation Price, Consensus and EPS Surprise
United States Cellular Corporation price-consensus-eps-surprise-chart | United States Cellular Corporation Quote
Revenues
Quarterly total operating revenues were relatively flat at $963 million and surpassed the consensus estimate of $957 million. While revenues from service increased 2.8% year over year to $762 million, the same from equipment sales declined 10.7% to $201 million as social distancing measures due to coronavirus fears led to retail store closures.
Other Details
Total operating expenses inched up 1.2% year over year to $913 million, primarily due to higher depreciation and amortization charges as well as SG&A expenses. Operating income was $50 million compared with $64 million in the prior-year quarter. In the first quarter, adjusted EBITDA came in at $281 million whereas adjusted OIBDA was $231 million.
Operating Metrics
While total cell sites in service were 6,629 at the end of the reported quarter compared with 6,506 a year ago, company-owned towers were 4,184 compared with 4,106. As of Mar 31, postpaid ARPU increased to $47.23 from $45.44 and postpaid ARPA (average revenue per account) rose to $122.92 from $118.84. Postpaid churn declined to 1.21% from 1.26% reported a year ago. Prepaid ARPU increased to $34.07 from $33.44 and prepaid churn fell to 4.67% from 4.92%.
Cash Flow & Liquidity
During the first three months of 2020, U.S. Cellular generated $342 million of net cash from operations compared with $287 million in the year-ago quarter. For the same period, the company’s non-GAAP free cash flow totaled $27 million compared with $180 million in the prior-year quarter.
As of Mar 31, 2020, the wireless telecommunications service provider had $258 million in cash and equivalents with $1,503 million of net long-term debt. Notably, U.S. Cellular repurchased 803,836 shares for $23 million in first-quarter 2020.
2020 Revenue Guidance Reiterated
Despite uncertainties pertaining to the coronavirus pandemic, U.S. Cellular has kept its revenue guidance for 2020 unchanged. The company continues to expect service revenues in the band of $3,000-$3,100 million. Adjusted EBITDA is projected in the range of $900-$1,025 million compared with previous expectation of $950-$1,075 million. The company anticipates adjusted OIBDA in the band of $725-$850 million compared with earlier expectations of $775-$900 million. Capital expenditures are expected between $850 million and $950 million.
Going Forward
U.S. Cellular continues to strengthen its customer base while improving churn management and enhancing brand positioning. With focus on the cost structure, the company has been making efforts to provide essential products and services. Markedly, the company witnessed a year-over-year rise of 59% in data traffic, thereby meeting increased network demands in this hour of crisis. U.S. Cellular’s supply chain and logistics were also in full swing where nearly 70% of its retail stores remained open in this pandemic. Progressing with 5G and network modernization initiatives, the company intends to attract new customers by providing superior quality network and national coverage. Due to the impact of COVID-19 pandemic, macroeconomic factors like unemployment and credit market downfall coupled with lower store traffic could negatively impact U.S. Cellular’s profitability.
Zacks Rank & Stocks to Consider
U.S. Cellular currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader industry are InterDigital, Inc. (IDCC - Free Report) , Opera Limited (OPRA - Free Report) and Radcom Ltd. (RDCM - Free Report) . While InterDigital sports a Zacks Rank #1 (Strong Buy), Opera and Radcom carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
InterDigital’s bottom line surpassed the Zacks Consensus Estimate thrice in the last four quarters. The company has a trailing four-quarter positive earnings surprise of 62%, on average.
Opera’s bottom line surpassed the Zacks Consensus Estimate twice in the last four quarters. The company has a trailing four-quarter positive earnings surprise of 192.9%, on average.
Radcom’s bottom line surpassed the Zacks Consensus Estimate thrice in the last four quarters. The company has a trailing four-quarter positive earnings surprise of 47.1%, on average.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>