Telecom Stock Q2 Earnings Queued For Aug 5: LSXMK, USM, NIHD

With the earnings season drawing to a close, the overall earnings scenario appears to be gloomy. As more companies report their quarterly numbers, the predictions of this quarter being the fifth straight quarter of an earnings decline seems more pertinent. As per the recent Earnings Preview, total S&P 500 earnings are expected to decline 3.4% on the back of 0.4% lower revenues. Additionally, the third-quarter estimates are on a downward spiral too, with all indications pointing to an earnings recession that is here to prevail. However, we anticipate the effects of this downturn to subside in the fourth quarter and meaningful earnings growth to resume thereon.

Telecom Stocks Earnings to Date:

The telecom industry is part of the broader Computer & Technology sector. As per our Earnings Preview report, earnings for this sector are down 0.9% year over year. However, if we condense it down to just the telecom industry – which comprises telecom operators and equipment manufacturers – we are likely to witness reasonable growth through 2016. This is evident from this quarter’s performance by the telecom players. The Telecom service providers’ have displayed 6% year-over-year earnings growth while telecom equipment has witnessed growth of 1.3% year over year to date. We believe that continuous advancement in technologies and adoption of newer business models are aiding this industry to improve its revenues.

We focus on three telecom stocks that are scheduled to report their second-quarter financial results on Aug 5.

The Liberty SiriusXM Group (NASDAQ:LSXMK) provides satellite radio services comprising commercial-free music, sports, news, talk, entertainment, traffic and weather. The company has a Zacks Rank #2 (Buy) and an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 28 cents. According to our proven model, a company needs the right combination of two key ingredients – a positive Earnings ESP and a Zacks Rank #3 or better – to increase the odds of an earnings surprise. Thus, Liberty SiriusXM doesn’t conclusively show that it is likely to beat the Zacks Consensus Estimate this quarter.

United States Cellular Corporation (NYSE:USM) is the eighth largest wireless company in the U.S., based on the aggregate number of customers in its consolidated markets. The company has a combination of Zacks Rank #3 and an Earnings ESP of 0.00%. This is because both Most Accurate estimate and the Zacks Consensus Estimate are pegged at 17 cents. Although Zacks Rank #3 increases the predictive power of ESP, we need a positive Earnings ESP to be confident of an earnings beat and hence United States Cellular doesn’t conclusively show that it is likely to beat the Zacks Consensus Estimate this quarter (read more: Can U.S. Cellular Spring a Surprise in Q2 Earnings?).

Telephone & Data Systems Inc. (NYSE:TDS) is a diversified telecommunications corporation. Telephone & Data Systems has a combination of Zacks Rank #3 and an Earnings ESP of 0.00%. This is because both Most Accurate estimate and the Zacks Consensus Estimate stand at 16 cents. As stated above, we need a positive Earnings ESP to be confident of an earnings beat and hence Telephone & Data Systems doesn’t conclusively show that it is likely to beat the Zacks Consensus Estimate this quarter (read more: Telephone and Data Systems: Q2 Earnings Preview).