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Telecom Stock Roundup: Sprint, ADTRAN Incur Wider Quarterly Loss & More

Supriyo Bose

In the past five trading days, telecom stocks witnessed a roller-coaster ride as optimism about the “Phase One” deal between the United States and China withered on uncertainty regarding the venue and the date for signing the proposed agreement. The partial trade accord is anticipated to ease the bilateral tensions created by the prolonged trade war. However, reported demand by the communist nation to roll back the existing U.S. tariffs raised speculations about a probable signing of an agreement in mid-November between President Trump and his Chinese counterpart. In addition, lower-than-expected earnings and relatively soft outlook from hitherto declared results have triggered uncertainty within the beleaguered sector.

Although the sudden push for tariff rollback is not expected to derail the trade negotiations, both the countries have been unable to reach a consensus regarding the venue of the meeting, with a European location appearing to be a preferred choice at the moment. While both sides remain intent to reach an agreement at the earliest on domestic compulsions, it appears that the trade war has been rather a ‘two-steps forward, three-steps backward’ affair. This, in turn, has largely dragged the sector down despite the fact that the S&P is hovering around record-high territories backed by broad-based expectations of a trade settlement, solid jobs report and healthy payroll gains.

Meanwhile, China has launched 5G commercial services across the country as three leading state-run telecom players, namely China Mobile, China Unicom and China Telecom rolled out 5G data services in 50 cities. Although the communist nation appears to be a late entrant in the 5G race, it is likely to be a frontrunner by next year followed by South Korea and the United States, per Bernstein Research estimates.

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.      Sprint Corporation S reported lackluster second-quarter fiscal 2019 results, wherein the top line decreased year over year.

For the September quarter, net loss was $274 million or loss of 7 cents per share against net income of $196 million or 5 cents per share in the year-ago quarter. The sharp decline was primarily due to lower revenues for the quarter. The bottom line was wider than the Zacks Consensus Estimate of a loss of 1 cent. Quarterly total net operating revenues declined to $7,795 million from $8,433 million in the year-ago quarter mainly due to lower service revenues and equipment sales. The top line missed the consensus estimate of $8,165 million. (Read more: Sprint's Q2 Loss Wider Than Expected, Revenues Fall Y/Y)
 
2.     ADTRAN, Inc. ADTN reported lackluster third-quarter 2019 financial results, wherein the top line decreased year over year.

Non-GAAP net loss was $2.8 million or loss of 6 cents per share against net income of $9.9 million or 21 cents per share in the prior-year quarter. The bottom line was wider than the Zacks Consensus Estimate of a loss of 2 cents. Quarterly revenues were $114.1 million compared with $140.3 million in the year-earlier quarter, matching the consensus estimate. (Read more: ADTRAN Q3 Loss Wider Than Expected, Revenues Fall Y/Y)

3.      Arista Networks, Inc. ANET reported solid third-quarter 2019 results, wherein both the bottom line and the top line increased year over year, and surpassed the respective Zacks Consensus Estimate. The strong quarterly performance reflected the underlying strength of the resilient business model and diligent execution of operational plans.

Quarterly non-GAAP net income came in at $217.1 million or $2.69 per share compared with $171.3 million or $2.11 per share in the year-ago quarter. The bottom line beat the consensus estimate by 25 cents. Quarterly total revenues increased 16.2% year over year to $654.4 million and were at the higher end of the company’s guidance of $647-$657 million, driven by healthy overall demand and strong performance from cloud titan and enterprise verticals. The top line surpassed the Zacks Consensus Estimate of $653 million. (Read more: Arista Beats Q3 Earnings Estimates on Higher Revenues)

4.     Altice USA, Inc. ATUS reported healthy third-quarter 2019 financial results, wherein both the top line and the bottom line increased on a year-over-year basis.

Net income for the September quarter was $77.2 million or 12 cents per share compared with $32.6 million or 4 cents per share in the prior-year quarter. The bottom line matched the Zacks Consensus Estimate. Quarterly total revenues increased 0.9% year over year to $2,438.7 million. The top line, however, lagged the consensus estimate of $2,488 million. (Read more: Altice Q3 Earnings Match Estimates, Revenues Up Y/Y)

5.     Viavi Solutions Inc. VIAV reported solid first-quarter fiscal 2020 results, wherein both the bottom line and the top line surpassed the respective Zacks Consensus Estimate, and increased year over year.

Quarterly non-GAAP net income came in at $42.9 million or 18 cents per share compared with $35.2 million or 15 cents per share in the year-ago quarter. The bottom line beat the consensus estimate by 2 cents. Quarterly total revenues increased 11.7% year over year to $299.8 million and exceeded the company’s guidance of $288 million, driven by strong performance of fiber, wireless and 3D sensing products. The top line surpassed the Zacks Consensus Estimate of $288 million. (Read more: Viavi Q1 Earnings Beat Estimates, Revenues Grow Y/Y)

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, Juniper was the biggest gainer with its share price increasing 4% while Arista Networks was the biggest decliner with its stock down 29.3%.

Over the past six months, AT&T has been the best performer with its stock appreciating 22.8%, while Arista Networks was the biggest decliner with its stock down 39.8%.

Over the past six months, the Zacks Telecommunications Services industry has recorded average growth of 7% while the S&P 500 has rallied 6.5%.



What’s Next in the Telecom Space?

In addition to select few quarterly earnings releases, strategic deals and 5G deployments, all eyes will remain glued to how the government handles the various issues related to the “Phase One” deal.

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ADTRAN, Inc. (ADTN) : Free Stock Analysis Report
 
Viavi Solutions Inc. (VIAV) : Free Stock Analysis Report
 
Arista Networks, Inc. (ANET) : Free Stock Analysis Report
 
Sprint Corporation (S) : Free Stock Analysis Report
 
Altice USA, Inc. (ATUS) : Free Stock Analysis Report
 
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