The overall Technology sector, of which Telecom is an essential part, is likely to report soft first-quarter 2020 earnings. The sector is expected to have taken a hit due to the coronavirus pandemic, which disrupted normal business operations and supply-chain mechanisms of various telecom firms as they preferred to exercise caution and put on hold their delivery schedules to and from China and other countries like South Korea until the health risks were neutralized. This induced a ‘supply shock’ caused by factory shutdowns and travel restrictions sparked by the virus outbreak. This, in turn, affected the sector’s profitability and triggered insecurity within the industry. Sector revenues, particularly within the chip industry, are expected to have declined significantly as the market bore the brunt of the global lockdown.
Various trade restrictions on grounds of national security concerns further hampered the supply-chain mechanism of the companies and eroded sector margins. In addition, higher infrastructure investments are expected to have escalated operating costs as 5G deployments picked up pace across the United States.
Upfront investments in capital and wireless spectrum for 5G have proven to be substantially higher than prior generations of wireless deployments due to network density requirements, potentially hurting return of capital metrics. The potential for meaningful revenues to lag 5G buildouts poses significant credit risks for providers pursuing aggressive deployments. This has become all the more pronounced as the industry lacks any clarity on the actual impact of coronavirus on the business, forcing some companies to even withdraw guidance.
Technological advances have changed the way consumers communicate, resulting in higher home data consumption and video streaming, with digital sustainability being the norm of the day as countless people seek the refuge of the safety of their homes to prevent exposure to the virus. But the worldwide mayhem induced by the virus, intense competition and commoditization of services have limited the chances of benefiting from these trends.
Per the latest Earnings Preview, total earnings for the Technology sector for the March quarter are expected to be down 0.7% on 4.6% higher revenues year over year. This compares unfavorably with the prior-quarter earnings growth of 5.9% on 5.5% revenue growth year over year.
Let’s take a look at three Telecom stocks that are slated to report first-quarter 2020 results on Apr 28.
Corning Incorporated GLW is scheduled to report results before the opening bell. The Zacks Consensus Estimate for total revenues stands at $2,486 million. The consensus mark for earnings is pegged at 16 cents per share, indicating a 60% slump from the prior-year quarter’s reported figure.
Our proven model does not predict an earnings beat for Corning this time around. The absence of the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) decreases the odds of an earnings beat.
Corning currently has an Earnings ESP of +0.29% and a Zacks Rank #4 (Sell).
Corning Incorporated Price and EPS Surprise
Corning Incorporated price-eps-surprise | Corning Incorporated Quote
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In Optical Communications, Corning expects first-quarter 2020 sales to be down almost 25% year over year due to overall market weakness stemming from customers’ project spending decisions, primarily in carrier networks. In Display Technologies, lower glass volumes and prices are likely to have negatively impacted the company’s growth profile.
Juniper Networks, Inc. JNPR is slated to report results after the closing bell. The Zacks Consensus Estimate for total revenues is pegged at $1,006 million, which indicates a rise of 0.4% from the year-ago quarter’s reported figure. Adjusted earnings per share are pegged at 25 cents, which calls for a decline of 3.8% from the prior-year quarter’s reported figure.
Juniper has an Earnings ESP of -12.69% and a Zacks Rank #4.
Juniper Networks, Inc. Price and EPS Surprise
Juniper Networks, Inc. price-eps-surprise | Juniper Networks, Inc. Quote
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The company is expected to have recorded slightly higher aggregate revenues on a year-over-year basis. This takes into account the business challenges at some of its largest service provider customers, persistent impacts from its sales force transformation and macro-economic uncertainties. The company has made significant changes to its go-to-market structure to better align its sales strategies with each of the core customer verticals.
Iridium Communications Inc. IRDM is scheduled to report results before the opening bell. The Zacks Consensus Estimate for total revenues stands at $141 million, up from $134 million reported in the year-earlier quarter. The consensus mark for loss is pegged at 16 cents per share, indicating an 11.1% improvement from the prior-year quarter’s recorded figure.
Being the sole provider of mobile voice and data satellite communications network, Iridium benefits from a highly lucrative recurring service revenue base. The company has witnessed a steady subscriber growth and mobile penetration, backed by an efficient operating model. It is focused on augmenting both commercial and government service revenues in order to leverage its fixed-cost infrastructure.
Iridium has an Earnings ESP of -12.50% and a Zacks Rank #3.
Iridium Communications Inc Price and EPS Surprise
Iridium Communications Inc price-eps-surprise | Iridium Communications Inc Quote
Check back later for our full write-up on earnings releases of these stocks.
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