Telecom Stock Roundup: Qualcomm Reports Earnings, Ericsson Inks Deal & More

In the past five trading days, telecom stocks initially declined and recovered partially after a flat trajectory as a broad sell-off in leading technology stocks led to a ripple effect across the board. Global macroeconomic woes and strengthening dollar cumulatively led to the heightened volatility in the stock market. Moreover, the unrelenting trade war tensions with China continued to hinder the smooth sailing of stocks.

Amid such cacophony, the Federal Communications Commission (“FCC”) initiated the first-ever high-band 5G spectrum auction last week in order to gain an upper hand over China in the 5G race, with the bidding process starting with spectrum in the 28 GHz band followed by the 24 GHz band. The FCC is making 1.55 GHz of spectrum available through these two auctions. It will further auction three more millimeter-wave spectrum bands — 37 GHz, 39 GHz and 47 GHz — in 2019 as it pursues a comprehensive strategy to implement the 5G FAST (Facilitate America's Superiority in 5G Technology) Plan. Through these auctions, the FCC will push almost 5 GHz of spectrum into the commercial marketplace over the next 15 months.

The 5G FAST Plan encompasses three key components, including an aggressive spectrum auctioning, infrastructure upgrade and modernization of obsolete regulations. This would probably help the country to assume a leadership position in the next generation of wireless connectivity through faster speeds and low-latency wireless broadband services, cultivating the Internet of Things and hitherto unimagined innovations.

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. QUALCOMM Incorporated (NASDAQ:QCOM) reported healthy fourth-quarter fiscal 2018 results backed by proper execution of its strategic priorities to drive technology and product leadership, particularly in 5G. Notably, growth of leading customers in China was a positive for the company both on volume and improving mix of devices.

Quarterly non-GAAP net income came in at $1,280 million or 90 cents per share compared with $1,375 million or 92 cents per share in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by 7 cents. Quarterly non-GAAP revenues came in at $5,833 million compared with $5,957 million in the year-ago quarter, surpassing the Zacks Consensus Estimate of $5,535 million. (Read more: QUALCOMM Q4 Earnings and Revenues Surpass Estimates)

2. CenturyLink (NYSE:CTL), Inc. (NYSE:T) reported mixed third-quarter 2018 results wherein the top line missed the Zacks Consensus Estimate but the bottom line surpassed the same.

Net income (excluding integration-related expenses and special items) came in at $327 million or 30 cents per share compared with $114 million or 21 cents per share in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by 3 cents. Quarterly operating revenues increased 44.2% year over year to $5,818 million driven by incremental revenues from Level 3. The top line, however, lagged the Zacks Consensus Estimate of $5,890 million. (Read more: CenturyLink Q3 Earnings Beat, Revenues Increase Y/Y)

3. Ubiquiti Networks, Inc. (NASDAQ:UBNT) reported healthy first-quarter fiscal 2019 results, wherein both the bottom line and the top line surpassed the respective Zacks Consensus Estimate.

Non-GAAP net income came in at $86.2 million or $1.17 per share compared with $74.9 million or 92 cents per share a year ago. The bottom line beat the Zacks Consensus Estimate by 24 cents. Quarterly revenues increased 15.1% year over year to $282.9 million primarily driven by higher sales at Enterprise Technology business. The top line surpassed the Zacks Consensus Estimate of $252 million. (Read more: Ubiquiti Q1 Earnings Beat Estimates on Revenue Growth)

4. Ericsson (BS:ERICAs) (NASDAQ:ERIC) has inked a deal with Norwegian multinational telecommunications firm Telenor Group to help it better adapt to the modalities of upgraded network infrastructure to embrace 5G technology. The strategic deal will help Telenor to transform its core network in key European markets of Sweden, Denmark and Norway.

Per the Network Function Virtualization contract, Telenor will deploy Ericsson Cloud Core solutions for 5G across multiple data centers in designated locations, leveraging Ericsson’s portfolio of network function solutions and related services. This will help Telenor to be more agile as it aims to launch commercial 5G services using both fixed and mobile access. In addition to improving operational efficiency, the transformation will augment the network capabilities for seamless IoT applications and other potential future services. (Read more: Ericsson to Help Telenor Transform to 5G in Key Markets)

5. Ciena Corporation (NYSE:CIEN) announced that Southern (NYSE:SO) Cross Cables has deployed its WaveLogic Ai tunable coherent optics and the T-Series solutions to address the demand for seamless connectivity across the board. Incidentally, the trans-Pacific network of telecommunications cables firm became the first of its kind to deploy Ciena’s GeoMesh Extreme solution across subsea cables.

The strategic deployment of Ciena’s technology will augment the capacity of Southern Cross undersea cable and add an unmatched level of intelligence and service capability in submarine cable networks. This will help Southern Cross to proactively manage and grow its network with changing user demands. (Read more: Ciena's GeoMesh Extreme Powers Southern Cross Expansion)

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, Verizon Communications Inc. (NYSE:VZ) was the biggest gainer, with its share price increasing 2.2%. Qualcomm was the major decliner, with its stock losing 17.2%.

Over the past six months, Verizon has been the best performer, with its stock appreciating 18.8% while AT&T Inc. (NYSE:T) declined the most, with its shares falling 5.9%.

Over the past six months, the Zacks Telecommunications Services industry has recorded an average return of 0.7% while the S&P 500 declined 0.9%.

What’s Next in the Telecom Space?

In addition to continued product launches and deployment of 5G technologies, all eyes will remain glued to how the companies respond to the 5G auction.

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