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Telecom Stock Roundup: Verizon, Rogers Communications and Crown Castle Post Mixed Q3

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Abbott (ABT) has an impressive earnings surprise history and currently possesses the right combination of the two key ingredients for a likely beat in its next quarterly report.

The U.S. telecom industry remained rather subdued last week. On the earnings front, telecom behemoth Verizon Communications Inc. VZ reported mixed financial numbers in the third quarter of 2017. While the top line surpassed the Zacks Consensus Estimate, the bottom line met the mark.

Nevertheless, the company gained 0.603 million postpaid wireless customers and 0.139 million prepaid wireless customers. In the reported quarter, Verizon lost 18,000 FiOS video subscribers. However, it gained 11,000 FiOS digital voice residential connections and 66,000 FiOS Internet subscribers.

In a separate development, Verizon dropped Univision Inc.’s Spanish language TV channels from its fiber-based FiOS TV network. In a letter to the Federal Communications Commission (FCC), Univision complained that the U.S. telecom behemoth pulled down its TV channels at 4:59 p.m. on Oct 16, two minutes before Univision's carriage deal with Verizon was set to expire, without any prior notice to the company.

Univision is the largest Spanish-language TV broadcaster in the United States and is partially controlled by the Mexican cable MSO (multi service operator) Grupo Televisa SA TV.

Rogers Communications Inc. RCI, the largest integrated telecom operator in Canada, reported mixed financial results for the third quarter of 2017, wherein the bottom line surpassed the Zacks Consensus Estimate but the top line missed the same. In the third quarter, the company added 129,000 postpaid wireless subscribers and 27,000 high-speed Internet customers, but lost 18,000 video subscribers.

Leading wireless communication tower operator Crown Castle International Corp. CCI also reported mixed results for the third quarter of 2017. While the company’s bottom line surpassed the Zacks Consensus Estimate, the top line lagged the same. The board of directors declared a quarterly cash dividend of $1.05 per common share, reflecting an increase of approximately 11% compared with the prior-quarter figure of 95 cents per share.

Meanwhile, U.S. telecom giant AT&T Inc. T announced that its third-quarter 2017 financial results will be hurt by recent natural calamities such as the multiple hurricanes that hit the U.S. coasts and a devastating earthquake in Mexico.

The company announced that it lost a net 90,000 U.S. video subscribers in the quarter because of intense competition in traditional pay TV markets, as well as the impact of the recent hurricanes. Customer reduction is likely to continue in the fourth quarter as the company is yet to fully restore its operations, which were destroyed by natural calamities.

Moreover, AT&T and First Responder Network Authority (FirstNet) recently introduced a new developer program focused on public safety innovation. The program will supply applications to a new FirstNet app store. These apps will be utilized by first responders who will select appropriate solutions to work on the FirstNet network that AT&T is set to build.

AT&T’s consortium to deploy FirstNet includes Motorola Solutions Inc. MSI, General Dynamics Corp. GD, Sapient Consulting and Inmarsat Government. AT&T currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here

Read the last Telecom Stock Roundup for Oct 12, 2017.

Recap of the Week’s Most Important Stories

1. Quarterly-GAAP net income of Verizon was $3,736 million compared with $3,747 million in the year-ago quarter. Adjusted earnings per share were 98 cents in the reported quarter, in line with the Zacks Consensus Estimate.Total revenues increased 2.5% year over year to $31,717 million beating the Zacks Consensus Estimate of $31,252 million. (Read more: Verizon Q3 Earnings in Line, Revenues Beat Estimates)

2. Rogers Communications’ quarterly net income was approximately $372.66 million compared with $335.16 million in the year-ago quarter. Adjusted earnings per share of 81 cents came in above the Zacks Consensus Estimate of 79 cents.Quarterly total revenues were around $2,856 million, down 3% year over year and below the Zacks Consensus Estimate of $2,897 million. (Read more:  Rogers Communications Q3 Earnings Beat, Revenues Miss)

3. Crown Castle reported quarterly earnings per share of $1.15 beating the Zacks Consensus Estimate of $1.10. GAAP net income (loss) came at $115.2 million, up 17% year over year. Total revenues in the third quarter increased 7.2% year over year to $1,063.24 million against the Zacks Consensus Estimate of $1,067.6 million. Site Rental Segment quarterly revenues were $892.76 million, up 10% year over year. Network Services Segment quarterly revenues were $170.48 million, down 5.3% year over year. (Read more:  Crown Castle Beats Q3 Earnings, Lags Revenues Estimates)

4. Conflict between TV broadcasters and pay-TV operators is not new in the United States. Verizon has claimed that Univision has proposed an increase of more than double of what they charge as retransmission fees for accessing their channels. This is an excessive price increase by any means. The company also believes that the appeal for Univision’s programming is waning, given their declining viewership. (Read more: Verizon in Tussle With Univision for TV Retransmission Deal)

5. AT&T operates in fiercely competitive U.S. telecom market, which is characterized by cut-throat pricing competition.Moreover, AT&T’s wireline division is struggling with persistent losses in access lines as a result of competitive pressure from voice-over-Internet protocol (VoIP) service providers and aggressive triple-play (voice, data, video) offerings by cable companies. These are weighing on the company’s revenues and margins. (Read more:  AT&T's Q3 Results to be Dampened by Natural Disasters)

Price Performance

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

Company

Last Week

Last 6 Months

VZ

0.86%

0.55%

T

-7.49%

-11.33%

S

-4.08%

-17.50%

TMUS

-1.44%

-5.56%

CHTR

-4.28%

5.41%

TEF

-1.14%

-4.67%

AMX

6.60%

28.78%

CMCSA

-2.92%

-1.68%

DISH

0.59%

-17.22%

In the last five trading sessions, share price movement of most of the major telecom stocks was negative. AT&T (7.49%), Charter Communications (4.28%) and Sprint (4.08%) lost significantly, while America Movil (6.60%) gained substantially during this period. Similarly, price performances of most of the major telecom stocks witnessed a negative trend in the last six months. While America Movil (28.78%) gained remarkably, Sprint (17.50%), DISH Network (17.22%) and AT&T (11.33%) lost substantially in the same time frame.  

What’s Next in the Telecom Space?

We expect a lot of activity in the telecom sector over the next week as big names like AT&T, Comcast and Charter Communications will release their third-quarter 2017 financial results. Outside the U.S., America Movil, Shaw Communications, Telefonica, Telefonica Brasil and Chunghwa Telecom are also slated to report their third-quarter 2017 financial results. The markets will keep a watch on these quarterly results to assess industry dynamics and growth prospects.

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Crown Castle International Corporation (CCI) : Free Stock Analysis Report
 
Motorola Solutions, Inc. (MSI) : Free Stock Analysis Report
 
AT&T Inc. (T) : Free Stock Analysis Report
 
Verizon Communications Inc. (VZ) : Free Stock Analysis Report
 
General Dynamics Corporation (GD) : Free Stock Analysis Report
 
Grupo Televisa S.A. (TV) : Free Stock Analysis Report
 
Rogers Communication, Inc. (RCI) : Free Stock Analysis Report
 
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