Telecom Stock Roundup: Mixed Q2 For Major Non-U.S. Telecom Operators

The telecom sector was hooked on earnings news over the last week too. Several large non-U.S. telecom MNCs (multi-national corporations) have announced their second-quarter 2016 financial results. The overall reports were mixed for most of these companies.

Mexican telecom behemoth America Movil S.A.B. de C.V. (NYSE:AMX) reported mixed financial results in second-quarter 2016. While the top line surpassed the Zacks Consensus Estimate, the bottom line missed the same. For the third consecutive quarter, the company’s profit margin in Mexico, its biggest market, fell below the level of 40% (to 33%). Stringent regulatory measures and intensifying competition in Mexico were the primary reasons for the poor performance.

America Movil's total subscriber count was approximately 364.5 million as of Jun 30, 2016, down 0.9% year over year. This figure includes about 282.9 million wireless subscribers, 33.7 million landlines, 26 million broadband accesses and 22 million pay-TV units.

Brazilian telecom carrier Telefonica (MC:TEF) Brasil SA (NYSE:VIV) -- a subsidiary of Spanish telecom giant Telefonica SA (NYSE:TEF) -- reported mixed financial results in the second quarter of 2016. The company’s earnings missed the Zacks Consensus Estimate while revenues outpaced the same. At the end of the reported quarter, Telefonica Brasil’s mobile customer base, fixed telephony access lines and pay-TV subscriber base declined 11.3%, 0.9% and 1.4% year over year, respectively. However, fixed broadband customer base and Internet & data access lines rose 2.4% and 1.4%, respectively.

Meanwhile, Telefonica SA reported weak financial results in the second quarter of 2016. The company’s net earnings were down year over year while revenues fell short of the Zacks Consensus Estimate. As of Jun 30, 2016, total customer access lines of Telefonica were approximately 341.9223 million, down 1.8% year over year.

On the other hand, French telecom major Orange SA (NYSE:ORAN) reported impressive results in the second quarter of 2016. The company’s revenues beat the Zacks Consensus Estimate while adjusted EBITDA (earnings before interest, tax, depreciation and amortization) increased 2.3% year over year. As of Jun 30, 2016, Orange had 249.55 million subscribers (excluding MVNOs) across its operating territories, up 0.5% from the year-ago quarter.

Meanwhile, the largest Taiwanese integrated telecom operator Chunghwa Telecom Co. Ltd. (NYSE:CHT) declared weak financial results in the second quarter of 2016. Both earnings per ADR and total revenue dropped year over year. The total broadband subscriber base was over 4.49 million, out of which the FTTx subscriber base was around 3.44 million, accounting for 76.6% of the total broadband subscriber base.Mobile subscriber base was 10.87 million, down 2.5% year over year.

In the U.S., leading wireless tower operator American Tower Corp. (NYSE:AMT) reported strong financial numbers for the second quarter of 2016, with both the top and bottom line outpacing the respective Zacks Consensus Estimate.Leading optical transport network developer, Infinera Corp. (NASDAQ:INFN) , also reported strong financial results in the second quarter of 2016, wherein both the top and the bottom line outpaced the respective Zacks Consensus Estimate.

Reginal telecom operator Frontier Communications Corp. (NASDAQ:FTR) reported mixed financial results in the second quarter of 2016. The company’s adjusted net loss was narrower than the Zacks Consensus Estimate but revenues fell short of the same. As of Jun 30, 2016, the company had 4,570,000 high-speed broadband subscribers and 1,628,000 video customers.

Read the last Telecom Stock Roundup for Jul 28, 2016.

Recap of the Week’s Most Important Stories

1. America Movil’s quarterly earnings per ADR (American Depository Receipt) of 13 cents were significantly below the Zacks Consensus Estimate of 24 cents. Total revenue of approximately $12,911 million in the reported quarter rose 6.1% on a year-over-year basis. The top line also outpaced the Zacks Consensus Estimate of $12,457 million. (read more: America Movil Lags Earnings, Tops Revenues in Q2.)

2. Telefonica Brasil’s second-quarter net income was approximately $200 million, down a substantial 29.3% year over year. Moreover, earnings per ADR were 12 cents, well below the Zacks Consensus Estimate of 19 cents. Net operating revenues were around $2,998 million, up 9.5% year over year and ahead of the Zacks Consensus Estimate of $2,935 million. (read more: Telefonica Brasil Lags Q2 Earnings, Tops Revenues.)

3. On a GAAP basis, Frontier Communications incurred a net loss of $80 million or 7 cents per share in the reported quarter, compared with a net loss of $28 million or 3 cents per share in the prior-year quarter. However, quarterly adjusted loss per share was 2 cents, much narrower than the Zacks Consensus Estimate of a loss of 5 cents per share. Total revenues increased a whopping 90.6% year over year to $2,608 million. However, the figure lagged the Zacks Consensus Estimate of $2,744 million. (read more: Frontier Communications Loss Lower than Expected.)

4. American Tower reported second-quarter 2016 earnings per share of $1.38, well ahead of the Zacks Consensus Estimate of $1.33. GAAP net income also increased 24.4% year over year to $160.8 million. Total revenue of $1,442.2 million increased 22.8% year over year but lagged the Zacks Consensus Estimate of $1,445 million. (read more: American Tower Tops Q2 Earnings, Lags Revenues.)

5. Infinera reported second-quarter adjusted earnings per share of 15 cents, which were above the Zacks Consensus Estimate of 13 cents. Quarterly GAAP net income was $11.5 million or 8 cents a share, compared with the year-ago net income of $17.9 million or 13 cents a share. Quarterly total revenue came in at $258.8 million, up 24.8% year over year, which also surpassed the Zacks Consensus Estimate of $256 million. (read more: Infinera Tops Q2 Earnings and Revenue Estimates.)

Price Performance

The following table shows the price movement of the major telecom players over the past week and the last six months.

Over the last five trading sessions, share price movement of the major telecom stocks witnessed a mixed trend. Apart from Sprint, which gained a considerable 6.65%, the other major telecom stocks witnessed minor gains or losses. Over the last six months, the price performance of most of the telecom stocks was positive. Among the stocks that gained significantly were Sprint (115.19%), T-Mobile US (21.99%), AT&T (NYSE:T) (18.09%), Comcast (NASDAQ:CMCSA) (14.83%) and China Mobile (13.53%). On the other hand, America Movil lost 20.48% in the same time frame.

What’s Next in the Telecom Sector?

Earnings releases will continue to dominate proceedings in the telecom sector over the next week as diversified telecom carriers like BCE Inc., TU Corp., Telephone and Data Systems, United States Cellular Corp., Cincinnati Bell and Windstream Holdings are lined up to report their second-quarter 2016 financial results. The market will closely watch these quarterly results in order to assess industry dynamics and growth prospects.