U.S. Markets open in 53 mins

Telecom Stock Roundup: Harris, Corning Trump Earnings Estimates & More

Supriyo Bose

In the past five trading days, telecom stocks witnessed an uptrend after an initial decline as more industry participants reported earnings. However, the sector lost some of the gains at the later stages of the week as the industry remained mired in uncertainty regarding the probable merger of T-Mobile US Inc. TMUS and Sprint Corporation S. The firms have extended the deadline for the merger to Jul 29, 2019, by which they need to convince both the U.S. Federal Communications Commission and the Justice Department to give a nod against anti-competitive and anti-trust issues.

Meanwhile, the overall earnings season has unfolded on a relatively promising note, with better-than-expected performance by most sectors dispelling widespread recessionary fears. However, the Technology sector, of which the Telecom stocks are part, has recorded a sedate start to the earnings season, and is on track to record one of the softest performances in recent years. Taking the broader picture in count, the industry appears to be still grappling with the aftereffects of the trade war and higher investments for technology and infrastructure upgrade for 5G deployments.  

On the other hand, uncertainty regarding U.S.-China trade negotiations remained another stumbling block, as the nine-month old trade war that disrupted supply chains and weighed on the world economy is yet to be fully resolved. Although both the warring countries have agreed upon the enforcement mechanisms, the finer details are reportedly still under deliberations. As the industry awaits an early resolution to the prolonged bilateral talks to better focus on the impending 5G boom, efforts are on to give a final push to a mutually acceptable trade deal by May end that is easily enforceable.

Regarding company-specific news, quarterly earnings primarily took the center stage over the past five trading days.

Recap of the Week’s Most Important Stories

1.    Harris Corporation HRS reported solid third-quarter fiscal 2019 financial results with double-digit EPS growth for the sixth consecutive quarter driven by highest organic revenue growth and margin in the past eight years. Both the top line and the bottom line surpassed the respective Zacks Consensus Estimate.

Non-GAAP earnings improved 30.2% year over year to $2.11 per share, beating the Zacks Consensus Estimate of $2.04. Quarterly revenues from product sales and services increased 10.6% year over year to $1,728 million, driven by strong growth across all three segments. The top line surpassed the Zacks Consensus Estimate of $1,703 million. (Read more: Harris Q3 Earnings & Revenues Beat, FY19 View Up)

2.    Corning Incorporated GLW reported solid first-quarter 2019 financial results, led by investments in product development and manufacturing capacity, driving sales and profit growth across markets.

Core earnings came in at $365 million or 40 cents per share compared with $299 million or 31 cents per share in the year-earlier quarter. Adjusted earnings beat the Zacks Consensus Estimate by 1 cent. Core sales increased 13.4% to $2,850 million, surpassing the Zacks Consensus Estimate of $2,813 million. (Read more: Corning Q1 Earnings & Revenues Top Estimates, Up Y/Y)

3.    NETGEAR, Inc. NTGR reported strong first-quarter 2019 results, surpassing both the top line and bottom-line estimates. The better-than-expected performance was driven by strength in its Orbi line of mesh WiFi systems, Nighthawk Pro Gaming, cable modems and gateways and SMB switching portfolio.

Non-GAAP net income from continuing operations improved to 60 cents per share from 26 cents in the year-ago quarter, comfortably beating the Zacks Consensus Estimate of 49 cents. NETGEAR generated quarterly net revenues of $249.1 million, up 1.6% year over year as growth in SMB more than offset the decline in the Connected Home segment. The top line surpassed the consensus estimate of $247 million and came in at the higher end of its previously guided range of $235-$250 million. (Read more: NETGEAR Trumps Q1 Earnings and Revenue Estimates)

4.    Frontier Communications Corporation FTR reported lackluster first-quarter 2019 results with year-over-year decrease in revenues and wider loss despite stringent cost management.

Adjusted net loss for the quarter was 18 cents per share, narrower than the Zacks Consensus Estimate of a loss of 45 cents. Quarterly revenues were $2,101 million compared with $2,199 million in the year-ago quarter. The year-over-year decline was primarily due to lower revenues from all the segments. The reported revenues, however, beat the Zacks Consensus Estimate of $2,098 million. (Read more: Frontier Reports Narrower-Than-Expected Loss in Q1)

5.     Woodward, Inc. WWD reported solid second-quarter fiscal 2019 results, wherein both the bottom line and top line surpassed estimates as well as increased year over year, largely driven by strength in Aerospace segment.

Adjusted net earnings came in at $90.3 million or $1.40 per share compared with $52.4 million or 82 cents per share in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by 35 cents. Quarterly net sales increased 38.4% year over year to $758.8 million, attributable to sales growth in both Aerospace and Industrial segments. The top line also surpassed the Zacks Consensus Estimate of $662 million. (Read more: Woodward Q2 Earnings Beat Estimates on Higher Revenues)

Price Performance

The following table shows the price movement of some of the major telecom stocks over the past week and during the past six months.

In the past five trading days, Harris was the biggest gainer with its share price increasing 7.4% while Juniper Networks was the largest decliner with its stock down 3.3%.

Over the past six months, Qualcomm has been the best performer with its stock appreciating 26.5%, while Sprint was the biggest decliner with its shares falling 12.8%.

Over the past six months, the Zacks Telecommunications Services industry has recorded average decline of 2% while the S&P 500 rallied 6.5%.

What’s Next in the Telecom Space?

In addition to product launches and deployment of 5G technologies, all eyes will remain glued to how other industry participants fare in the earnings season and in what way the United States and China continue their negotiations for a long-term solution to the trade war.

Zacks' Top 10 Stocks for 2019

In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-holds for the year?

Who wouldn't? Our annual Top 10s have beaten the market with amazing regularity. In 2018, while the market dropped -5.2%, the portfolio scored well into double-digits overall with individual stocks rising as high as +61.5%. And from 2012-2017, while the market boomed +126.3, Zacks' Top 10s reached an even more sensational +181.9%.

See Latest Stocks Today >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
NETGEAR, Inc. (NTGR) : Free Stock Analysis Report
Harris Corporation (HRS) : Free Stock Analysis Report
Sprint Corporation (S) : Free Stock Analysis Report
Corning Incorporated (GLW) : Free Stock Analysis Report
Woodward, Inc. (WWD) : Free Stock Analysis Report
Frontier Communications Corporation (FTR) : Free Stock Analysis Report
T-Mobile US, Inc. (TMUS) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research