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Telecom Stock Roundup: AMT, TDS, USM Post Mixed Q4, FTR & WIN Disappoint

Zacks Equity Research

Last week was all about earnings for the telecom sector. American Tower Corp. AMT, Telephone and Data Systems Inc. TDS, United States Cellular Corp. USM and Cable ONE Inc. CABO reported mixed financial results for the fourth quarter of 2016. On the other hand, Frontier Communications Corp. FTR and Windstream Holdings Inc. WIN posted disappointing financial numbers.

American Tower’s bottom line outpaced the Zacks Consensus Estimate while the top line lagged the same. For 2017, the company anticipates property revenues in the range of $6,210–$6,390 million and consolidated adjusted Funds from Operations (AFFO) in the $2,700–$2,800 million band.

United States Cellular’s top line missed the Zacks Consensus Estimate while the bottom line surpassed the mark. In the reported quarter, the company lost a net of 2,000 postpaid subscribers as against the addition of 68,000 in the year-ago quarter. It gained 4,000 prepaid customers in the same quarter compared with 7,000 in the prior-year quarter.

Telephone & Data Systems also reported mixed financial results in the fourth quarter of 2016, wherein the top line lagged the Zacks Consensus Estimate while the bottom line met the consensus mark. As of Dec 31, 2016, Telephone & Data Systems had 585,400 residential wireline connections, up 0.5% year over year. It had 329,700 commercial wireline connections, down 3.3% year over year.Total cable connections were 292,400, up 4.3% year over year.

Small-sized cable MSO (multi-service operator) Cable ONE’s top line surpassed the Zacks Consensus Estimate by a nominal margin while the bottom line missed the same. At 2016-end, total customers at the Residential segment were 605,699, down 1.9% year over year. Total customers at the Business segment were 51,523, up 8.7% year over year.

On the other hand, Frontier Communications’ adjusted net loss was wider than the Zacks Consensus Estimate and revenues also fell short of the mark. As of Dec 31, 2016, the number of residential customers decreased 2.9% sequentially to 4,891,000. Business customers decreased 2.7%, sequentially to 502,000. Frontier Communications had 4,271,000 high-speed broadband subscribers, down 2.1% sequentially and 1,419,000 video customers, down 5.6% sequentially.

Likewise, both the top and the bottom line of Windstream Holdings fell short of the Zacks Consensus Estimate. At the end of 2016, the company had 1,354,600 Household customers, down 6% year over year. High-speed Internet customer base was 1,051,100, down 4% year over year and digital TV customer count totaled 321,000, down 11% year over year. Windstream Holdings currently carries a Zacks Rank #2 (Buy). You can see  the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Outside the U.S., Brazilian telecom carrier Telefonica Brasil SA VIV reported impressive financial results in the fourth quarter of 2016. Fourth-quarter net income was approximately $368 million, down 37.4% year over year. However, earnings per ADR (American Depositary Receipt) were 22 cents, well above the Zacks Consensus Estimate of 19 cents.Net operating revenue was around $3,296 million, up 17.8% year over year.

Read the last Telecom Stock Roundup for Mar 02, 2017.

Recap of the Week’s Most Important Stories

1.    GAAP net loss at Telephone and Data Systems in the fourth quarter of 2016 was $5 million or a loss of 5 cents per share compared with a net loss of $1 million or a loss of 1 cent in the year-ago quarter. Quarterly loss per share of 5 cents was in line with the Zacks Consensus Estimate. Revenues were up 0.3% year over year to $1,278 million in the reported quarter, below the Zacks Consensus Estimate of $1,351.4 million (read more: Telephone & Data Systems Posts In-Line Loss in Q4).

2.    In the fourth quarter of 2016, GAAP net loss of United States Cellular came in at $6 million or a loss of 7 cents per share compared with a net loss of $2 million or a loss of 2 cents in the year-ago quarter. Quarterly loss per share of 7 cents was narrower than the Zacks Consensus Estimate of 8 cents. Quarterly revenues of $991 million were up 0.4% year over year but fell short of the Zacks Consensus Estimate of $1,022.6 million (read more: United States Cellular Q4 Loss Narrower than Expected).

3.    American Tower’s quarterly adjusted AFFO of $631 million were up 17% year over year.  AFFO per share was $1.47, up 16.7% year over year. Moreover, the AFFO per share of $1.47 surpassed the Zacks Consensus Estimate of $1.42. Total revenue of $1,539.6 million increased 20.3% year over year but missed the Zacks Consensus Estimate of $1,550 million (read more: American Tower Beats on Q4 Earnings, Revenues Lag).

4.    On a GAAP basis, net loss of Frontier Communications in the reported quarter was $133 million or a loss of 12 cents per share compared with a net loss of $156 million or 14 cents in the prior-year quarter. However, quarterly adjusted (excluding special items) loss per share was 4 cents, a penny wider than the Zacks Consensus Estimate. Total revenue increased a whopping 70.5% year over year to $2,409 million, missing the Zacks Consensus Estimate of $2,500.3 million (read more: Frontier Communications Q4 Loss Wider than Expected).

5.    On a GAAP basis, Windstream Holdings reported net loss of $86.9 million or a loss of 94 cents per share compared with a net income of $140.5 million or $1.41 in the year-ago quarter. On an adjusted basis, the company’s quarterly loss per share of 51 cents was wider than the Zacks Consensus Estimate of a loss of 47 cents.Total revenue declined 8% year over year to $1,309.1 million in the fourth quarter, missing the Zacks Consensus Estimate of $1,337.8 million (read more: Windstream Reports Wider-than-Expected Loss in Q4).

Price Performance

The following table shows the price movement of the major telecom players over the past week and the last six months.

Company

Last Week

Last 6 Months

VZ

-0.08%

-5.81%

T

0.84%

2.66%

S

-4.53%

37.69%

TMUS

-1.74%

31.82%

CHTR

0.53%

19.64%

TEF

3.00%

2.16%

AMX

0.88%

9.74%

CMCSA

-1.34%

13.63%

DISH

-1.51%

19.72%

Over the last five trading sessions, share price movement of most of the major telecom stocks witnessed a mixed trend. While Sprint (4.53%) lost substantially over the same time frame, Telefonica (3.00%) gained the most. However, over the last six months, the price performance of most of the major telecom stocks was predominantly positive, barring Verizon. Among the stocks that gained significantly are Sprint (37.69%), T-Mobile US (31.82%), DISH Network (19.72%), Charter Communications (19.64%) and Comcast (13.63%).

What’s Next in the Telecom Space?

We do not foresee any significant changes in the telecom industry or overall global economic factors that can affect the industry in the coming week. Consequently, we expect stocks to trade in line with the broader market.

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American Tower Corporation (REIT) (AMT): Free Stock Analysis Report
 
Telephone and Data Systems, Inc. (TDS): Free Stock Analysis Report
 
Windstream Holdings, Inc. (WIN): Free Stock Analysis Report
 
Frontier Communications Corporation (FTR): Free Stock Analysis Report
 
United States Cellular Corporation (USM): Free Stock Analysis Report
 
Telefonica Brasil S.A. (VIV): Free Stock Analysis Report
 
Cable One, Inc. (CABO): Free Stock Analysis Report
 
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