The overall Technology sector, of which Telecom is an essential part, is likely to report relatively healthy earnings this season compared with other sectors. Despite taking a hit due to the coronavirus pandemic, which disrupted normal business operations of various telecom firms, the sector appears to have been better placed, with digital sustainability being the norm of the day. However, a ‘supply shock’ caused by factory shutdowns and travel restrictions, sparked by the virus outbreak, has affected the sector’s profitability. Sector revenues, particularly within the chip industry, are expected to have declined as the market bore the brunt of the adverse economic impact of the global lockdown.
Various trade restrictions on grounds of national security concerns further hampered the supply-chain mechanism of 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 the virus on businesses, forcing some companies to even withdraw guidance.
Technological advances have changed the way consumers communicate, resulting in higher home data consumption and video streaming, 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 June quarter are expected to be down 3.2% on 3.2% higher revenues year over year. This compares unfavorably with the prior quarter’s earnings growth of 3.8% on 4% revenue growth.
Let’s take a look at five Telecom stocks that are slated to report quarterly results on Aug 6.
Motorola Solutions Inc. MSI is slated to report second-quarter 2020 results after the closing bell. The company is expected to have recorded lower aggregate revenues on a year-over-year basis, primarily due to economic disruptions stemming from the COVID-19 pandemic. The Zacks Consensus Estimate for total revenues is pegged at $1,574 million. In the year-earlier quarter, it generated revenues of $1,860 million. The consensus mark for earnings is currently pegged at $1.20 per share, indicating a decline from $1.69 reported in the year-earlier quarter. During the first-quarter 2020 earnings release, management expected second-quarter 2020 non-GAAP earnings to be in the $1.18-$1.27 per share range on a year-over-year revenue decline of 14-17%.
Our proven model does not conclusively predict an earnings beat for Motorola this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This, however, is not the case here.
Motorola currently has an Earnings ESP of 0.00% and a Zacks Rank #4 (Sell).
Motorola Solutions, Inc. Price and EPS Surprise
Motorola Solutions, Inc. price-eps-surprise | Motorola Solutions, Inc. Quote
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
During the second quarter, Motorola augmented mission-critical communications infrastructure with the launch of the TLK 150 Mobile Two-Way Radio that adheres to all security guidelines of the Federal Motor Carrier Safety Administration pertaining to driver safety and offers a perfect solution for the on-the-go workforce. However, a higher working capital requirement due to the implementation of new ERP system is hurting the company's cash from operations. In addition, soft demand for certain products and services amid coronavirus-induced uncertainties is likely to have affected second-quarter revenues.
T-Mobile US, Inc. TMUS is scheduled to report second-quarter 2020 results after the closing bell. For the June quarter, the Zacks Consensus Estimate for total revenues is pegged at $17,773 million that indicates a rise of 61.9% from the year-ago quarter’s reported figure. Adjusted earnings are pegged at 35 cents per share, which calls for a decline of 72.9% from the prior-year quarter’s reported figure.
T-Mobile currently has an Earnings ESP of -42.71% and a Zacks Rank #1.
TMobile US, Inc. Price and EPS Surprise
TMobile US, Inc. price-eps-surprise | TMobile US, Inc. Quote
You can see the complete list of today’s Zacks #1 Rank stocks here.
During the quarter, T-Mobile closed its long-pending merger with Sprint to create a new wireless giant that rivals AT&T and Verizon in terms of subscribers. The deal allowed the companies to join their high- and low-band spectrum for a faster nationwide 5G rollout, which disrupted the competitive landscape of the U.S. telecom market. T-Mobile also achieved a historic milestone by offering 5G services across all 50 states in the country. Such developments are likely to have positively impacted the company’s second-quarter top line.
Viasat, Inc. VSAT is slated to report first-quarter fiscal 2021 results after the closing bell. For the June quarter, the Zacks Consensus Estimate for total revenues is pegged at $515 million that indicates a decline of 4.1% from the year-ago quarter’s reported figure. The consensus mark for adjusted loss is pegged at 38 cents per share. Viasat recorded a loss of 19 cents per share in the prior-year quarter.
Viasat currently has an Earnings ESP of 0.00% and a Zacks Rank #5 (Strong Sell).
Viasat Inc. Price and EPS Surprise
Viasat Inc. price-eps-surprise | Viasat Inc. Quote
During the quarter, Viasat inked an agreement with Honeywell International Inc. to provide enhanced aviation services. The partnership will strengthen Viasat’s in-flight connectivity solutions and enable Ku-band Advanced customers to enjoy high-speed Internet connectivity from takeoff to touchdown. However, lower aviation demand amid stiff lockdown restrictions is likely to have reduced its revenues. In addition, customization of network offerings and boosting satellite data networks to fend off competitive pressure are likely to have led to soft margins and loss of market share.
InterDigital, Inc. IDCC is scheduled to report second-quarter 2020 results before the opening bell. For the second quarter, the Zacks Consensus Estimate for total revenues is pegged at $97 million that indicates a rise of 27.6% from the year-ago quarter’s reported figure. The consensus mark for adjusted earnings are pegged at 62 cents per share, which calls for a rise of 158.3% from the prior-year quarter’s recorded figure.
InterDigital currently has an Earnings ESP of +4.28% and a Zacks Rank #3.
InterDigital, Inc. Price and EPS Surprise
InterDigital, Inc. price-eps-surprise | InterDigital, Inc. Quote
During the quarter, InterDigital inked a global non-exclusive patent licensing deal with China tech behemoth — Huawei. Apart from putting an end to years of legal disputes, the strategic move is likely to have enhanced InterDigital’s diversified portfolio of wireless technology and intellectual property amid the current economic downturn. The company also joined forces with tech giants — Blacknut and NVIDIA Corporation — for the launch of an avant-garde cloud-gaming solution equipped with best-in-class AI capabilities and machine learning-enabled user interface for an interactive and seamless gaming experience. Such developments are likely to have positively impacted the company’s second-quarter top line.
Cogent Communications Holdings, Inc. CCOI is slated to report second-quarter 2020 results before the opening bell. For the second quarter, the Zacks Consensus Estimate for total revenues is pegged at $143 million that indicates a rise of 5.9% from the year-ago quarter’s reported figure. The consensus mark for adjusted earnings are pegged at 23 cents per share, which calls for a rise of 43.7% from the prior-year quarter’s reported figure.
Cogent currently has an Earnings ESP of 0.00% and a Zacks Rank #2.
Cogent Communications Holdings, Inc. Price and EPS Surprise
Cogent Communications Holdings, Inc. price-eps-surprise | Cogent Communications Holdings, Inc. Quote
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