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U.S. Cellular (USM) Soars to 52-Week High, Time to Cash Out?

Zacks Equity Research
Nasdaq (NDAQ) reported earnings 30 days ago. What's next for the stock? We take a look at earnings estimates for some clues.

Have you been paying attention to shares of United States Cellular (USM)? Shares have been on the move with the stock up 9.7% over the past month. The stock hit a new 52-week high of $58.48 in the previous session. United States Cellular has gained 10.5% since the start of the year compared to the 4.3% move for the Zacks Computer and Technology sector and the 5.4% return for the Zacks Wireless National industry.

What's Driving the Outperformance?

The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on November 2, 2018, U.S. Cellular reported EPS of $0.41 versus consensus estimate of $0.24.

For the current fiscal year, U.S. Cellular is expected to post earnings of $1.46 per share on $3.97 billion in revenues. Meanwhile, for the next fiscal year, the company is expected to earn $1.73 per share on $4.03 billion in revenues. This represents a year-over-year change of -9.96% and 1.63%, respectively.

Valuation Metrics

U.S. Cellular may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.

On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.

U.S. Cellular has a Value Score of C. The stock's Growth and Momentum Scores are A and C, respectively, giving the company a VGM Score of B.

In terms of its value breakdown, the stock currently trades at 39.3X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 7.3X versus its peer group's average of 7.2X. Additionally, the stock has a PEG ratio of 39.27. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, U.S. Cellular currently has a Zacks Rank of #1 (Strong Buy) thanks to rising earnings estimates.

Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if U.S. Cellular meets the list of requirements. Thus, it seems as though U.S. Cellular shares could still be poised for more gains ahead.

How Does U.S. Cellular Stack Up to the Competition?

Shares of U.S. Cellular have been moving higher, and the company still appears to be a decent choice, but what about the rest of the industry? Some of its industry peers are also impressive, including Sprint (S), ATN International (ATNI), and PLDT (PHI), all of which currently have a Zacks Rank of at least #2 and a VGM Score of at least B, making them well-rounded choices.

The Zacks Industry Rank is in the top 23% of all the industries we have in our universe, so it looks like there are some nice tailwinds for U.S. Cellular, even beyond its own solid fundamental situation.


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