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The Zacks Analyst Blog Highlights: T-Mobile US, Nokia, Arista Networks, Plantronics and Vocera Communications

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For Immediate Release

Chicago, IL – November 5, 2021 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: T-Mobile US, Inc. TMUS, Nokia Corporation NOK, Arista Networks, Inc. ANET, Plantronics, Inc. POLY and Vocera Communications, Inc. VCRA.

Here are highlights from Thursday’s Analyst Blog:

Telecom Stock Roundup: Q3 Earnings Edition

Over the past five trading days, U.S. telecom stocks witnessed a rollercoaster ride. The initial gains were offset by a decline as the $1.2 trillion infrastructure bill failed to make any headway in the House, triggering uncertainty within the sector. The bill has been stuck in a potential stalemate for weeks and has been intertwined with the progress of the larger $3.5 trillion budget reconciliation bill that is facing massive backlash from both Republicans and Democrats.

The social spending reconciliation package was slashed from $3.5 trillion to $1.75 trillion as President Biden aimed to broker a deal between the warring factions of the party, abandoning some key provisions within the bill in order to win the trust of the progressives. Both the infrastructure bill and social spending reconciliation package are likely to be put to vote this week and their successful passage through the House to be deemed as law appear to hang in balance, owing to latent internal squabbling between the moderate and progressive Democrats. However, the Fed tapering decision probably helped the industry to witness a late surge amid optimism surrounding the overall economic growth.

While the policy paralysis continued to cripple operations, the House passed the bipartisan Secure Equipment Act in a rare act of unity that would empower the FCC to prevent the use of any telecommunications equipment manufactured by China-backed entities in the domestic markets. The bill extended the purview of FCC control to private companies and would not only deter it from approving new requests but also revoke prior equipment approval on perceived risks to national security interests.

The latest move follows the official kick-off of the FCC-sponsored reimbursement program for ‘rip and replace’ of telecommunications gear that is manufactured by Huawei and ZTE. With supply chain disruptions and chip shortage plaguing operations, the hardware restructuring process is likely to further worsen the industry’s plight and delay the 5G deployment schedule.    

Meanwhile, China has vehemently opposed an FCC directive to bar China Telecom from operating in the United States over national security concerns. The communist nation has urged Washington to revoke the order after the federal agency offered the China-based firm 60 days to discontinue its services in the country. Although the punitive move is not likely to cause significant losses to the carrier that generates the bulk of its revenue from domestic operations, it is expected to aggravate the strained Sino-US relationship as the battle for 5G supremacy heats up.

Regarding company-specific news, quarterly earnings primarily took the center stage over the past five trading days.

Recap of the Week’s Most Important Stories

1.     T-Mobile US reported mixed third-quarter 2021 results, wherein the bottom line surpassed the Zacks Consensus Estimate but the top line missed the same. However, this Bellevue, WA-based wireless carrier continues to enjoy solid 5G traction across the United States with accretive customer growth, including higher postpaid net additions and record service revenues. Also, network integration progress drives higher merger synergies.

Net income in the September quarter was $691 million or 55 cents per share compared with $1,253 million or $1 per share in the prior-year quarter. The year-over-year deterioration was primarily due to higher merger-related costs of $707 million. However, the bottom line beat the Zacks Consensus Estimate by a penny, delivering a surprise of 1.9%. Quarterly total revenues inched up 1.8% year over year to $19,624 million, driven by continued customer growth and higher service revenues. However, the top line lagged the consensus estimate of $20,105 million.    

2.     Nokia reported mixed third-quarter 2021 results, wherein the bottom line beat the Zacks Consensus Estimate but the top line missed the same. Earnings and revenues increased on a year-over-year basis with continued strong execution across the business, improved cost competitiveness, solid 5G traction, and cash generation. Nokia’s focus on capital allocation and technology leadership in 2021 is expected to aid it to grow profitably in 2022 and beyond.

Comparable profit came in at €454 million ($535.3 million) or €0.08 (9 cents) per share, up from €300 million or €0.05 per share in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by a penny. On a constant currency basis, quarterly net sales grew 2% year over year to €5,399 million ($6,366 million) driven by continued strength in Network Infrastructure and Cloud & Network Services. The top line, however, lagged the consensus estimate of $6,556 million.

3.    Arista Networks reported strong third-quarter 2021 results, wherein both the bottom and the top lines hit record highs and beat the respective Zacks Consensus Estimate, driven by solid demand trends and healthy customer additions. Adjusted earnings and revenues also improved significantly year over year.

Excluding non-recurring items, non-GAAP net income was record high at $236.9 million or $2.96 per share compared with $192 million or $2.42 per share in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by 23 cents. Quarterly total revenues jumped 23.7% year over year to $748.7 million and were well ahead of the company’s guidance of $725-$745 million.

The rise was primarily led by solid customer additions and growth in the enterprise vertical, partially offset by shipment constraints resulting from the COVID-19 operating environment and supply-chain disruptions. The top line surpassed the consensus estimate of $737 million.

4.    Plantronics reported mixed second-quarter fiscal 2022 results, wherein the bottom line beat the Zacks Consensus Estimate but the top line missed the same. Despite global supply chain pressures, including semiconductor chip shortages and transportation constraints, Poly (the name under which Plantronics markets itself) remains focused on managing its profitability while continuing to invest in areas of accelerating growth.
 
Non-GAAP net income was $33.5 million or 77 cents per share compared with $38.4 million or 93 cents per share in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by 22 cents, delivering a surprise of 40%. Quarterly GAAP revenues grew 2% year over year to $419 million. Product revenues increased 4% to $361.4 million. Services revenues were $57.6 million, down from $63.3 million. The top line, however, missed the consensus estimate of $425 million.

5.    Vocera Communications reported healthy third-quarter 2021 results with both the bottom line and top line surpassing their respective Zacks Consensus Estimate. Higher revenues, software strength, and broad-based growth across its business supported by dynamic business fundamentals drove Vocera’s quarterly performance.

On a non-GAAP basis, quarterly net income was $10.8 million or 28 cents per share compared with $8.5 million or 26 cents per share in the prior-year quarter. The bottom line beat the Zacks Consensus Estimate by 12 cents. Quarterly revenues came in at $63.6 million compared with $53.8 million in the year-ago quarter.

The 18.72% year-over-year increase was primarily driven by higher product and service revenues coupled with major hospital system wins, thereby contributing to software growth. Broad-based growth across its business fueled by its market leadership position acted as significant tailwinds. The top line surpassed the consensus estimate of $61 million.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.


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