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U.S. Cellular (USM) Beats on Q1 Earnings, Raises 2021 Guidance

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United States Cellular Corporation USM reported healthy first-quarter 2021 results, wherein both the bottom line and the top line beat the respective Zacks Consensus Estimate.

Net Income

Net income in the March quarter was $60 million or 69 cents per share compared with $71 million or 81 cents per share in the prior-year quarter. The decline was primarily due to higher interest and income tax expenses. The bottom line, however, beat the Zacks Consensus Estimate by 8 cents.

United States Cellular Corporation Price, Consensus and EPS Surprise

United States Cellular Corporation Price, Consensus and EPS Surprise
United States Cellular Corporation Price, Consensus and EPS Surprise

United States Cellular Corporation price-consensus-eps-surprise-chart | United States Cellular Corporation Quote

Revenues

Quarterly total operating revenues grew 6.2% year over year to $1,023 million, which reflects strength in postpaid and prepaid handset additions. While service revenues inched up 1.2% to $771 million, equipment sales jumped 25.4% to $252 million. Also, the top line surpassed the consensus estimate of $985 million.

Other Details

Total operating expenses increased 2.8% year over year to $939 million. Operating income was $84 million, up from $50 million in the prior-year quarter. Adjusted EBITDA came in at $302 million, while adjusted OIBDA was $258 million.

Operating Metrics

Total cell sites in service were 6,802 at the end of the quarter compared with 6,629 a year ago. The company-owned towers were 4,270, up from 4,184.

As of Mar 31, 2021, postpaid average revenue per user (ARPU) increased to $47.65 from $47.23 year over year, and postpaid average revenue per account grew to $125.25 from $122.92. Postpaid churn declined to 1.12% from 1.21% reported in the year-ago quarter. Prepaid ARPU increased to $35.25 from $34.07, while prepaid churn fell to 4.37% from 4.67%.

Cash Flow & Liquidity

During the first quarter, U.S. Cellular generated $124 million of net cash from operations compared with $342 million in the year-ago quarter. Non-GAAP free cash flow was a negative $9 million against $27 million a year ago.

As of Mar 31, 2021, the company had $479 million in cash and cash equivalents with $2,981 million of long-term debt. This compares with the respective tallies of $1,271 million and $2,489 million at the end of the previous quarter.

2021 Guidance Raised

Thanks to the strong start to 2021, U.S. Cellular has raised guidance for the full year. It now expects service revenues in the band of $3,050-$3,150 million, up from prior guidance of $3,025-$3,125 million. Adjusted EBITDA is projected in the range of $1,025-$1,125 million, changed from prior guidance of $975-$1,125 million. Adjusted OIBDA is anticipated in the band of $850-$950 million, changed from prior guidance of $800-$950 million. Capital expenditures are estimated between $775 million and $875 million, unchanged from the prior projection.

Zacks Rank & Stocks to Consider

U.S. Cellular currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader industry are Vicor Corporation VICR, Cogent Communications Holdings, Inc. CCOI and Western Digital Corporation WDC, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Vicor delivered a trailing four-quarter earnings surprise of 80.6%, on average.

Cogent delivered a trailing four-quarter earnings surprise of 29%, on average.

Western Digital delivered a trailing four-quarter earnings surprise of 26.3%, on average.

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United States Cellular Corporation (USM) : Free Stock Analysis Report

Western Digital Corporation (WDC) : Free Stock Analysis Report

Cogent Communications Holdings, Inc. (CCOI) : Free Stock Analysis Report

Vicor Corporation (VICR) : Free Stock Analysis Report

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