Over the past five trading days, telecom stocks gradually inched up, buoyed by relatively healthy quarterly earnings results despite the doom and gloom induced by the coronavirus pandemic. The industry also pinned hopes on a likely consumer resilience in the domestic market as various states reopened their economies by easing the restrictions. At the same time, the markets appear to have factored in the element of uncertainty regarding the quantum of economic damage from the virus outbreak as it looks to rebuild, maintaining caution and keeping a vigil for a possible escalation in fresh cases.
As the country aims to speed up 5G deployment to make up for the opportunity costs, a bipartisan group of U.S. lawmakers has introduced the “Utilizing Strategic Allied (USA) Telecommunications Act of 2020.” The bill seeks to set aside $750 million to accelerate 5G deployment, while encouraging the use of open interfaced, standards-based, interoperable 5G networks. In addition to providing funds to deter the increasing dominance of China-based telecommunications equipment manufacturers, the legislation intends to encourage competition and help lower costs for trusted equipment over the long term.
Meanwhile, the Federal Communications Commission (FCC) issued showcase notices to four China-based telecom firms operating in the United States, namely China Telecom, China Unicom, Pacific Networks and ComNet. The operators have been asked to show legitimate causes within 30 days as to why their licenses should not be revoked on grounds of national security threats. The restraining orders on mobile networks and broadband providers from China are the latest bone of contention between the two superpowers, as the communist nation continues making investments to gain dominance in 5G. Notably, China is also preparing to release an ambitious 15-year blueprint to set the roadmap for the next generation of technologies. Dubbed China Standards 2035, it intends to focus on the domestic market and increase participation in the formulation of international technology standards.
Regarding company-specific news, quarterly earnings and collaborations for the 5G network primarily took the center stage over the past five trading days.
Recap of the Week’s Most Important Stories
1. Despite the worldwide mayhem induced by the coronavirus pandemic, Verizon Communications Inc. VZ started 2020 on a positive note, reporting relatively healthy first-quarter 2020 results, primarily led by the wireless business. With industry-leading wireless products and services, the company remains well poised to benefit from increased 5G deployment across the country under the new operational framework.
Excluding non-recurring items, adjusted earnings were $1.26 per share compared with $1.20 in the year-earlier quarter and beat the Zacks Consensus Estimate by 4 cents. Consolidated GAAP operating revenues for the quarter declined 1.6% year over year to $31,610 million as wireless service revenue growth was more than offset by lower wireless equipment revenues. The top line missed the consensus mark of $32,347 million.
2. Corning Incorporated GLW reported decent first-quarter 2020 results, with both top and bottom lines surpassing the Zacks Consensus Estimate. However, revenues and earnings declined on a year-over-year basis.
Quarterly core net income came in at $177 million or 20 cents per share compared with 365 million or 40 cents in the prior-year quarter. The bottom line beat the Zacks Consensus Estimate by 3 cents. First-quarter GAAP net sales were down 15% year over year to $2,391 million due to the material impact of changing market and customer dynamics in the Optical Communications, Display Technologies and Environmental Technologies business segments.
3. Juniper Networks, Inc. JNPR reported unimpressive first-quarter 2020 results, with the bottom and top lines missing the Zacks Consensus Estimate and declining year over year.
Quarterly non-GAAP net income was $77.2 million or 23 cents per share compared with $92.7 million or 26 cents in the year-ago quarter. The bottom line missed the Zacks Consensus Estimate by 2 cents. First-quarter total net revenues amounted to $998 million (slightly below the low end of the company’s guidance) compared with $1,001.7 million reported in the year-ago quarter. The top line lagged the consensus mark of $1,006 million.
4. Iridium Communications Inc. IRDM reported unimpressive first-quarter 2020 results, with GAAP net loss widening year on year. Nevertheless, revenues increased on a year-over-year basis.
First-quarter adjusted loss per share came in at 6 cents, narrower than a loss of 18 cents in the prior-year quarter. The bottom line was narrower than the Zacks Consensus Estimate of a loss of 16 cents. Quarterly revenues amounted to $145.3 million compared with $133.7 million in the year-ago quarter. The top line surpassed the consensus mark of $141 million.
5. InterDigital, Inc. IDCC recently announced a global non-exclusive patent licensing deal with China tech behemoth — Huawei.
This comes as a surprise to many as the companies have a bitter history of being actively involved in numerous patent license litigations. Apart from putting an end to years of legal disputes, the strategic move is likely to enhance InterDigital’s diversified portfolio of wireless technology and intellectual property amid the current economic downturn.
The following table shows the price movement of some of the major telecom stocks over the past week and the six months.
In the past five trading days, CenturyLink has been the biggest gainer with its share price increasing 12%, while Motorola has been the biggest decliner with its stock decreasing 1.8%.
Over the past six months, T-Mobile has been the sole performer with its stock appreciating 7.4%, while AT&T was the biggest decliner with its stock falling 22.5%.
Over the past six months, the Zacks Telecommunications Services industry declined 11.7%, while the S&P 500 recorded an average loss of 3.5%.
What’s Next in the Telecom Space?
In addition to product launches, deals and 5G deployments, all eyes will remain glued to the upcoming earnings season and how the administration attempts to mitigate the virus’s overall impact on the industry as several states seek to resume to normalcy by easing lockdown restrictions.
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