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Telephone and Data Systems' (TDS) Q2 Earnings Miss Estimates

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Telephone and Data Systems, Inc. TDS reported mixed second-quarter 2021 results, wherein the bottom line missed the Zacks Consensus Estimate but the top line beat the same.

The TDS family of companies has made meaningful progress on achieving its long-term strategic goals. Its commitment to maintaining financial flexibility has allowed it to take actions to lower the average cost of financing.

Net Income

Net income in the June quarter was $20 million or 17 cents per share compared with $65 million or 56 cents per share in the prior-year quarter. The decline was primarily due to lower operating income and higher interest expenses. The bottom line missed the Zacks Consensus Estimate by 9 cents.

Telephone and Data Systems, Inc. Price, Consensus and EPS Surprise

Telephone and Data Systems, Inc. Price, Consensus and EPS Surprise
Telephone and Data Systems, Inc. Price, Consensus and EPS Surprise

Telephone and Data Systems, Inc. price-consensus-eps-surprise-chart | Telephone and Data Systems, Inc. Quote

Revenues

Quarterly total operating revenues increased 3.8% year over year to $1,311 million, driven by growth in the U.S. Cellular and TDS Telecom businesses. The top line beat the consensus estimate of $1,306 million.

Segment Results

U.S. Cellular’s revenues grew 4.2% year over year to $1,014 million. The rise reflects an increase in service revenues and equipment sales. The service revenue growth was driven by higher postpaid average revenue per user (ARPU) as customers chose higher-value plans. U.S. Cellular’s 5G and network modernization programs are on track while it continues to be optimistic about the performance capabilities of the millimeter wave spectrum.

Total operating expenses increased to $978 million from $920 million. Operating income declined to $36 million from $53 million in the year-ago quarter. Postpaid ARPU improved to $47.74 from $46.24, and average revenue per account rose to $125.25 from $120.70. Prepaid ARPU increased to $35.64 from $34.89 a year ago.

TDS Telecom’s revenues were $252 million, up 4.6% year over year, driven by an increase in broadband connections while customers chose higher speeds. 1 Gig speeds are available to more than half of all service addresses. The TDS Telecom fiber footprint is expanding inside and outside of the traditional markets. Total operating expenses increased to $224 million from $210 million. Operating income slipped to $28 million from $31 million in the prior-year quarter. Total connections were 1,204,500 compared with 1,205,000 a year ago. Residential revenue per connection grew to $57.66 from $53.82.

Liquidity

As of Jun 30, 2021, the company had $385 million in cash and cash equivalents with $3,335 million of long-term debt.

2021 Guidance Reaffirmed

Telephone and Data Systems has reaffirmed guidance for full-year 2021. It continues to expect total operating revenues at TDS Telecom in the range of $975-$1,025 million. Adjusted EBITDA is projected to be $290-$320 million. Adjusted OIBDA is anticipated to be $290-$320 million. Capital expenditures are estimated in the band of $425-$475 million.

At U.S. Cellular, service revenues are expected in the band of $3,050-$3,150 million. Adjusted EBITDA is projected in the range of $1,025-$1,125 million. Adjusted OIBDA is anticipated in the band of $850-$950 million. Capital expenditures are estimated between $775 million and $875 million.

Zacks Rank & Stocks to Consider

Telephone and Data Systems currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader sector are Clearfield, Inc. CLFD, Juniper Networks, Inc. JNPR and Qualcomm, Inc. QCOM. While Clearfield carries a Zacks Rank #1 (Strong Buy), Juniper and Qualcomm carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Clearfield delivered a trailing four-quarter earnings surprise of 49%, on average.

Juniper pulled off a trailing four-quarter earnings surprise of 7.5%, on average.

Qualcomm delivered a trailing four-quarter earnings surprise of 13.5%, on average.


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