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Telecom Stock Roundup: Motorola, Ubiquiti Trump Earnings Estimates & More

Supriyo Bose

In the past five trading days, telecom stocks mostly traded flat for the bulk of the week owing to the continued market uncertainty triggered by trade-related headwinds and no apparent headways in the recent U.S.-China bilateral talks. However, the stocks witnessed a steep rise at the end of the week as President Trump proposed to extend the Mar 1 deadline to reach a sweeping agreement to end the trade skirmishes. A probable meeting between the leaders of both the countries is also in the cards in the near future.

The high-level trade negotiation between a team of U.S. delegates headed by Treasury Secretary Steven Mnuchin and their Chinese counterparts led by vice premier Liu He commenced from Monday and is scheduled to run through the week. Although no apparent breakthrough has been made, the Trump administration maintained that the talks were quite fruitful. Notably, President Trump offered an olive branch with proposal for a likely extension to the deadline to give negotiators more time for a long-term solution to the trade war. He also hinted that he could meet Chinese president Xi Jinping sometime later, to close the trade deal. Although specific discussions relating to restrictions for technology products remained muted, the industry cheered the positive developments.

Meanwhile, the government is moving closer to give the final touches to an executive order that could offer sweeping powers to the Commerce Department to review imported products by domestic firms and ban the outright sale of such equipment on grounds of national security interests. Industry observers feel that it could ultimately serve as a knell to some Chinese telecom firms and make it virtually impossible for them to operate in the U.S. shores if the bill is passed by President Trump. However, the proposed executive order is facing stiff opposition from rural telecom service providers that use low-cost Chinese equipment like that of Huwaei.

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

Recap of the Week’s Most Important Stories

1.    Motorola Solutions, Inc. MSI reported strong fourth-quarter 2018 results with record revenues, earnings per share, operating cash flow and backlog, driven by strength in both segments and diligent execution of operational plans. This marked an excellent end to 2018, which represented another year of healthy demand across its portfolio.

Non-GAAP earnings per share were $2.63 compared with $2.10 in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by 14 cents. Quarterly net sales were record high at $2,254 million compared with $1,957 million in the year-ago quarter, primarily driven by growth in both the segments. The top line exceeded the consensus estimate of $2,219 million. (Read more: Motorola Q4 Earnings Beat Estimates on Record Revenues)

2.    Ubiquiti Networks, Inc. UBNT reported solid second-quarter fiscal 2019 results, wherein both the bottom line and the top line surpassed the respective Zacks Consensus Estimate, and increased on a year-over-year basis.

Non-GAAP net income came in at $95.1 million or $1.33 per share compared with $59.6 million or 76 cents per share a year ago. The bottom line beat the Zacks Consensus Estimate by 39 cents. Quarterly revenues increased 22.5% year over year to $307.3 million, primarily driven by higher sales at Enterprise Technology business. The top line surpassed the consensus estimate of $253 million. (Read more: Ubiquiti Q2 Earnings Beat on Healthy Revenue Growth)

3.    Nokia Corporation NOK was recently selected by the Rakuten Group, a leading e-commerce and Internet-based services provider in Japan, to facilitate its smooth transition as a greenfield mobile operator in the country. The Finnish telecom equipment manufacturer will offer comprehensive turnkey services to enable Rakuten’s foray into a new cloud-native mobile network in Japan, thus evolving according to the dynamic needs of the industry.

To facilitate this transition, Nokia will provide full turnkey services to plan, manage, deploy and integrate cloud RAN, AirGile cloud-native core network technology and various software functions. Leveraging a 'zero footprint' site approach with remote radio heads connected to cloud RAN software, the company will incorporate technologies such as Nokia IP Multimedia Subsystem, Session Border Controller and Telco Application Server. This, in turn, will help in speed deployment and network scalability for the faster roll-out of services such as Voice over LTE. (Read more: Nokia to Power Rakuten's Cloud-Native Network Foray in Japan)

4.    Zayo Group Holdings, Inc. ZAYO reported lackluster second-quarter fiscal 2019 results, wherein both the top line and bottom line missed the respective Zacks Consensus Estimate.

Quarterly earnings came in at $30.2 million or 13 cents per share compared with $13.2 million or 5 cents per share in the year-earlier quarter. The year-over-year increase in earnings, despite lower revenues, was primarily due to lower operating expenses. The bottom line missed the consensus estimate by a couple of cents. Revenues decreased to $639.1 million from $653.1 million and missed the Zacks Consensus Estimate of $643 million. (Read more: Zayo Group Misses Q2 Earnings & Revenue Estimates)

5.    NETGEAR, Inc. NTGR reported mixed fourth-quarter 2018 results, wherein the top line beat the Zacks Consensus Estimate but the bottom line missed the same. The networking equipment maker’s financial performance was driven by strength in its Orbi, Nighthawk Pro Gaming, cable modems and gateways as well as SMB switching portfolio, particularly PoE and ProAV switches.

Quarterly non-GAAP net income from continuing operations came in at $22.3 million or 68 cents per share, missing the Zacks Consensus Estimate by 6 cents. The company generated quarterly net revenues of $288.9 million, up 5.4% year over year owing to growth for both the Connected Home and SMB segments. The top line surpassed the consensus estimate of $288 million. (Read more: NETGEAR Misses on Q4 Earnings Despite Top-Line Growth)

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, Motorola Solutions, Inc. was the biggest gainer with its share price increasing 12.5% while none declined.

Over the past six months, SBA Communications Corporation has been the best performer with its stock appreciating 15.9% while Qualcomm declined the most with its shares falling 27.3%.

Over the past six months, the Zacks Telecommunications Services industry has declined 1.3% while the S&P 500 fell 2.4%.

What’s Next in the Telecom Space?

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

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NETGEAR, Inc. (NTGR) : Free Stock Analysis Report
Zayo Group Holdings, Inc. (ZAYO) : Free Stock Analysis Report
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Motorola Solutions, Inc. (MSI) : Free Stock Analysis Report
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