A month has gone by since the last earnings report for United States Cellular (USM). Shares have added about 17.6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is U.S. Cellular due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
United States Cellular Q3 Earnings Beat, Guidance Up
United States Cellular recorded impressive third-quarter 2018 results wherein both the top and the bottom line surpassed the respective Zacks Consensus Estimate.
Quarterly total operating revenues increased 4% year over year to $1,001 million driven by growth in both its operating segments. The figure surpassed the Zacks Consensus Estimate of $994 million. While Service revenues improved 3% to $759 million, that from Equipment sales were up 7% to $242 million driven by more sales of higher-priced devices and accessories.
Net income for the quarter improved to $36 million or 41 cents per share from net loss of $299 million or loss of $3.51 per share in the year-ago quarter primarily due to lower operating expenses. The bottom line comfortably beat the Zacks Consensus Estimate of 24 cents.
Other Quarter Details
Total operating expenses declined 27% year over year to $967 million. Operating income came in at $34 million against operating loss of $360 million in the prior-year quarter.
While total cell sites in service were 6,506 at the quarter end compared with 6,436 in the prior-year quarter, company-owned towers were 4,119 compared with 4,051 in the year-ago period. Quarterly postpaid ARPU (average revenue per user) increased to $45.31 from $43.41, postpaid ARPA (average revenue per account) was $119.42 compared with $116.36. Postpaid churn rose to 1.29% from 1.16% in the year-ago period. Prepaid ARPU decreased to $32.09 from $33.12 and prepaid churn increased to 4.98% from 4.75%.
Cash Flow & Liquidity
For the first nine months of 2018, cash from operations aggregated $600 million compared with $394 million in the year-ago period. Non-GAAP free cash flow for the first nine months of the year was $323 million compared with $142 million in the year-ago period. As on Sep 30, 2018, United States Cellular had cash and cash equivalents of $730 million with net long-term debt of $1,609 million.
2018 Guidance Raised
For full-year 2018, United States Cellular raised guidance on the back of solid third-quarter results. It now expects total operating revenues in the band of $3,950-$4,000 million, up from previous range of $3,925-$4,025 million. Adjusted EBITDA is projected in the range of $925-$1,000 million, up from $850-$950 million expected earlier. The company anticipates adjusted OIBDA in the range of $760-$810 million, up from the previous guidance of $700-$800 million. Capital expenditures are expected to be around $500 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 173.33% due to these changes.
Currently, U.S. Cellular has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise U.S. Cellular has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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