Telecom Stock Roundup: Motorola, Arista, Altice & Others Report Q3 Earnings

In the past five trading days, telecom stocks experienced an uptrend and almost mirrored the broader S&P 500 Index, albeit with a relatively above-par performance. The stocks appeared to ride on the positive feelers associated with the mid-term polls for the smooth sail. In addition, healthy corporate earnings from the telecom industry in general seem to propel the stocks, despite the unrelenting trade war tensions with China.

A few days after the U.S. Commerce Department issued a restraining order for domestic firms to stop selling key software and technology to China provincial government-owned Fujian Jinhua Integrated Circuit Co., citing national security threats, the U.S. Justice Department issued a fresh indictment. The latest salvo indicted Fujian Jinhua and Taiwan-based United Microelectronics Corp of industrial espionage and accused them of conspiracy to steal trade secrets from U.S. semiconductor firm Micron Technology (NASDAQ:MU) relating to its memory storage devices. This is further likely to aggravate the trade relations of United States with China.

Among the various other developments in the past week affecting the industry, the notable were the U.S. Supreme Court’s denial to accept any challenge on net neutrality laws and the Federal Communications Commission (“FCC”) decision to send notices to telecom firms to address the issue of ‘robocalls’. While the favorable Supreme Court verdict is a win for net neutrality supporters, the fight over how internet access will be regulated is still far from over. The FCC’s decision to seek a detailed roadmap from leading telecom service providers was further aimed to end the unsolicited calls that users have to constantly grapple with, which had long been a demand from consumers.

Regarding company-specific news, earnings, strategic collaborations and product launches took the center stage over the past five trading days.

Recap of the Week’s Most Important Stories

1. Motorola Solutions, Inc. (NYSE:MSI) reported healthy third-quarter 2018 results on the back of strength in both segments primarily led by North America, resulting in year-over-year growth in sales and profitability.

Non-GAAP earnings per share were $1.94 compared with $1.53 in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by 22 cents. Quarterly total net sales were $1,862 million compared with $1,645 million in the year-ago quarter, primarily driven by growth in the Americas and EMEA, acquisitions and adoption of accounting standard ASC 606. The top line, however, missed the Zacks Consensus Estimate of $1,863 million. (Read more: Motorola Q3 Earnings Beat Estimates on Higher Sales)

2. Arista Networks, Inc. (NYSE:ANET) reported healthy third-quarter 2018 results with year-over-year increase in revenues and record earnings on the back of solid order trends and favorable growth dynamics. Both the top line and the bottom line surpassed the respective Zacks Consensus Estimate in the quarter.

Non-GAAP net income was $171.3 million or $2.11 per share compared with $128.2 million or $1.62 per share in the year-ago quarter. The bottom line surpassed the Zacks Consensus Estimate by 26 cents. Quarterly total revenues increased 28.7% year over year to $563.3 million led by higher product sales and strength in the Cloud Titans vertical. Also, the top line outpaced the Zacks Consensus Estimate of $547 million. (Read more: Arista Surpasses Q3 Earnings and Revenue Estimates)

3. Altice USA, Inc. (NYSE:ATUS) reported all-time best results in third-quarter 2018 with healthy year-over-year increase in earnings and revenues, driven by improved subscriber trends, highest ever margin and higher free cash flow.

Quarterly net income was $32.6 million or 4 cents per share against a net loss of $192.6 million or loss of 26 cents per share in the year-ago quarter. The radical improvement was mostly driven by higher revenues and lower depreciation and amortization charges. The reported earnings comfortably beat the Zacks Consensus Estimate of loss of 4 cents. Total revenues increased 4.1% year over year to $2,417.8 million driven by growth across all business segments and beat the Zacks Consensus Estimate of $2,401 million. (Read more: Altice Beats Q3 Earnings Estimates on Record Margins)

4. Telephone and Data Systems, Inc. (NYSE:TDS) reported healthy third-quarter 2018 results, primarily driven by U.S. Cellular’s increased revenues and profitability. Both the top line and the bottom line surpassed the respective Zacks Consensus Estimate in the quarter.

Net income came in at $46 million or 41 cents per share against a loss of $181 million or loss of $1.64 per share in the year-ago quarter primarily due to lower total operating expenses. The bottom line beat the Zacks Consensus Estimate by 15 cents. Quarterly total operating revenues were $1,297 million compared with $1,251 million in the prior-year quarter. The top line surpassed the consensus estimate of $1,288 million. (Read more: Telephone and Data Systems Q3 Earnings Top Estimates)

5. Watts Water Technologies, Inc. (NYSE:WTS) reported healthy third-quarter 2018 results mainly driven by strong operating performance in the Americas, resulting in year-over-year growth in sales and profitability. Both the top line and the bottom line surpassed the respective Zacks Consensus Estimates in the quarter.

Adjusted net income came in at $34 million or 99 cents per share compared with $27.5 million or 80 cents per share a year ago. The bottom line beat the Zacks Consensus Estimate by 4 cents. On a reported basis, quarterly net sales increased 7.2% year over year to $390.9 million primarily driven by strong performance in the Americas. The top line surpassed the Zacks Consensus Estimate of $380 million. (Read more: Watts Water Beats Earnings, Revenue Estimates in Q3)

Price Performance

The following table shows the price movement of some of the major telecom stocks over the past week and during the past six months.

In the past five trading days, SBA Communications Corporation (NASDAQ:SBAC) was the biggest gainer, with its share price increasing 4.9%. None of the stocks declined over the past week.

Over the past six months, Verizon Communications Inc. (NYSE:VZ) has been the best performer, with its stock appreciating 19.5% while Harris Corporation (NYSE:HRS) declined the most, with its shares falling 1.5%.

Over the past six months, the Zacks Telecommunications Services industry recorded an average return of 1.3% while the S&P 500 gained 2.1%.

What’s Next in the Telecom Space?

In addition to continued product launches and deployment of 5G technologies, all eyes will remain glued to the companies that are yet to report earnings.

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