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U.S. Cellular (USM) to Report Q2 Earnings: What's in Store?

Zacks Equity Research

United States Cellular Corporation USM is scheduled to report second-quarter 2019 results after the closing bell on Aug 1. In the last reported quarter, the company delivered a positive earnings surprise of 34.8%. U.S. Cellular surpassed the Zacks Consensus Estimate for earnings in each of the last four quarters, the average beat being 79.3%.

For the second quarter, the company is likely to report higher revenues on a year-over-year basis.

Factors to Consider

Bidding for high frequency spectrum in the recently hosted FCC Millimeter Wave Spectrum Auctions, U.S. Cellular successfully acquired licenses during the second quarter that cover 98% of its overall customers for $256 million or 1.7 cents per MHz passing one person (pop).

U.S. Cellular aims to address the growing demand for data services and create new opportunities for innovative services that require high speed, reliability and low latency. In the 28 GHz Auction, the wireless telecommunications service provider reportedly paid $129.4 million or 2.1 cents per MHz pop, securing 408 licenses covering 60% of its subscriber base, with at least 425 MHz of millimeter wave spectrum.

In the 24 GHz Auction, the company spent $126.6 million or 1.5 cents per MHz pop, acquiring 282 licenses covering 93% of its customers. Put together, the auctions enabled U.S. Cellular to acquire at least 300 MHz of spectrum in markets that accounts for 97% of its total subscriber base. As a result, the company can now cover most of its subscribers, enabling it to provide the cutting-edge capabilities of 5G technology.

All these are likely to be reflected in the upcoming results. The Zacks Consensus Estimate for total revenues for the second quarter is pegged at $1,002 million. In the year-earlier quarter, it generated revenues of $974 million.

Earnings Whispers

Our proven model does not conclusively show that U.S. Cellular will beat earnings in the second quarter as it does not possess the key components. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here as you will see below:

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is 0.00% with both pegged at 42 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

United States Cellular Corporation Price and EPS Surprise


United States Cellular Corporation Price and EPS Surprise

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

Zacks Rank: U.S. Cellular sports a Zacks Rank #1. Although this increases the predictive power of ESP, we need a positive ESP to be reasonably confident of an earnings beat.  

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.
Stocks to Consider

Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Ciena Corporation CIEN is set to release quarterly numbers on Aug 29. It has an Earnings ESP of +5.26% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Earnings ESP for Motorola Solutions, Inc. MSI is +1.25%, and it carries a Zacks Rank of 3. The company is set to report quarterly numbers on Aug 1.

The Earnings ESP for TELUS Corporation TU is +0.80% and it carries a Zacks Rank of 2. The company is slated to report quarterly numbers on Aug 2.

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