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U.S. Cellular (USM) Misses Earnings & Revenue Estimates in Q3

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United States Cellular Corporation USM reported unimpressive third-quarter 2021 results, wherein both the bottom and the top lines missed the Zacks Consensus Estimate.

Net Income

Net income in the September quarter was $34 million or 38 cents per share compared with $85 million or 97 cents per share in the prior-year quarter. The decline was due to lower operating income, and higher interest and income tax expenses. The bottom line missed the Zacks Consensus Estimate by 3 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 slipped 1.1% year over year to $1,016 million due to lower equipment sales. Service revenues increased 1.7% to $788 million, which reflects growth in retail service revenues, driven partly by the positive impact of postpaid average revenue per user (ARPU). Equipment sales fell 9.5% to $228 million. The top line missed the consensus estimate of $1,045 million.

Other Details

Total operating expenses increased 0.9% year over year to $971 million. Operating income was $45 million, down from $65 million. In the first nine months of 2021, adjusted EBITDA came in at $831 million while adjusted OIBDA was $689 million.

Operating Metrics

Total cell sites in service were 6,857 at the end of the reported quarter compared with 6,758 a year ago. The company-owned towers were 4,274, up from 4,246.

As of Sep 30, 2021, postpaid ARPU increased to $48.12 from $47.10 year over year, and postpaid average revenue per account grew to $125.99 from $123.27. Postpaid churn grew to 1.15% from 1.06%. Prepaid ARPU decreased to $35.05 from $35.45, and prepaid churn increased to 4.09% from 3.59%.

Cash Flow & Liquidity

During the first nine months of 2021, U.S. Cellular generated $667 million of cash from operating activities compared with $950 million in the prior-year period.

As of Sep 30, 2021, the company had $231 million in cash and cash equivalents with $2,604 million of long-term debt.

Outlook

U.S. Cellular continues to make progress toward its strategic priorities in a competitive environment. It is optimizing promotions that balance subscriber growth and profitability heading into the upcoming holiday season. While 5G and network modernization programs are on track, the company is optimistic about the use of the millimeter wave spectrum for fixed wireless access and its potential to serve rural customers.

U.S. Cellular has guided for full-year 2021. It now expects service revenues in the band of $3,075-$3,125 million, changed from the prior guidance of $3,050-$3,150 million. The company, however, has maintained its outlook for adjusted EBITDA in the range of $1,025-$1,125 million, and adjusted OIBDA in the band of $850-$950 million. Capital expenditures are estimated between $700 million and $800 million, changed from the prior guidance of $775 million to $875 million.

Zacks Rank & Stocks to Consider

U.S. Cellular currently has a Zacks Rank #5 (Strong Sell).

Some better-ranked stocks in the broader industry are Harmonic Inc. HLIT, Clearfield, Inc. CLFD, and SeaChange International, Inc. SEAC. While Harmonic and Clearfield sport a Zacks Rank #1 (Strong Buy), SeaChange carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Harmonic delivered a trailing four-quarter earnings surprise of 61.1%, on average.

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

SeaChange delivered a trailing four-quarter earnings surprise of 28.9%, on average.


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