Telecom Stock Roundup: Telephone & Data Systems, U.S. Cellular And TELUS Post Strong Q2

Like the previous two weeks, last week was all about earnings in the telecom sector. Several sector participants revealed their second-quarter 2016 financial numbers.

Telephone & Data Systems Inc. (NYSE:TDS) and its wireless subsidiary United States Cellular Corp. (NYSE:USM) reported strong financial results in the second quarter of 2016, wherein both the top and the bottom lines surpassed the respective Zacks Consensus Estimate.

As of Jun 30, 2016, Telephone & Data Systems had 590,200 residential wireline connections, up 0.4% year over year.The company exited the reported quarter with 334,900 commercial wireline connections, down 4.5% year over year.Total cable connections were 287,600, up 5.4% year over year.

On the other hand, U.S. Cellular exited the second quarter with a subscriber base of 4,973,000 compared with 4,779,000 at the end of the year-ago quarter. The postpaid subscriber base was 4,490,000 compared with 4,324,000 at the end of the prior-year quarter. The prepaid subscriber base totaled 413,000 compared with 368,000 at the end of the year-ago quarter.

Regional telecom operators, CenturyLink Inc. (NYSE:CTL) and Cincinnati Bell Inc. (NYSE:CBB) reported mixed results. CenturyLink’s bottom line outpaced the Zacks Consensus Estimate while the top line came in slightly below the consensus. Cincinnati Bell’s top line beat the Zacks Consensus Estimate but the bottom line missed the same.

As of Jun 30, 2016, CenturyLink’s total access lines were 11.413 million, down 5.7% year over year. High-speed broadband customer count was 5.99 million, down 1.9% and Prism TV customer was 0.311 million, up 20.5%. On the other hand, Cincinnati Bell had 0.2091 million residential local access lines, down 7.4% year over year and 0.3159 million business local access lines, up 2.9% year over year.

Small-sized cable MSO (multi service operator) Cable ONE Inc. (NYSE:CABO) reported strong financial results in the second quarter of 2016. Both the top and the bottom line surpassed the respective Zacks Consensus Estimate. As of Jun 30, 2016, the total customer base of Cable ONE was 659,943, down 1.8% year over year. The non-video customer base was 316,745, up 17.1% year over year.

Windstream Holdings Inc. (NASDAQ:WIN) reported mixed financial results in the second quarter of 2016. The company incurred narrower-than-expected loss in the quarter, while revenues lagged the Zacks Consensus Estimate.In the reported quarter, Windstream lost 4% of its high-speed Internet customers and 8% of its digital television subscribers.

Major cable MSO Charter Communications Inc. (NASDAQ:CHTR) also reported strong financial results in the second quarter of 2016, with both the bottom and the top line outpacing the respective Zacks Consensus Estimate. As of Jun 30, 2016, Charter Communications had 16.934 million video, 20.667 million high-speed Internet and 10.255 million voice customers for the residential segment. It also serves 378,000 video, 1,148,000 high-speed Internet and 725,000 voice subscribers in the commercial segment.

Outside the U.S., two leading Canadian operators, namely, TELUS Corp. (NYSE:TU) and BCE Inc. (TO:BCE) also reported their respective second quarter 2016 financial results. TELUS reported strong financial results with both revenues and earnings outpacing the respective Zacks Consensus Estimate. However, BCE disappointed, with both the top and the bottom line lagging the respective Zacks Consensus Estimate.

As of Jun 30, 2016, TELUS had 8.427 million wireless subscribers, up 0.9% year over year.Total wireline subscriber count was 4.067 million, up 1.9% year over year.The total wireless subscriber base of BCE increased 1.9% to 8,280,693. BCE had 2,750,596 TV subscribers, up 2.8% year over year.

Europe and Latin America based leading cable MSO and mobile service provider Liberty Global Plc. (NASDAQ:LBTYA) reported strong financial results in the second quarter, wherein both the top and the bottom line surpassed the respective Zacks Consensus Estimate.

As of Jun 30, 2016, Liberty Global had 25.7241 million subscribers, which constituted 53.9 million RGUs (revenue generating units). Of the total, 22.5 million were video RGUs, 17.1 million were broadband Internet RGUs and the remaining 14.3 million were telephony RGUs. Moreover, the company had 6.7 million mobile subscribers.

Read the last Telecom Stock Roundup for Aug 04, 2016.

Recap of the Week’s Most Important Stories

1. GAAP net income of Telephone & Data Systems in the second quarter of 2016 was $28 million or 25 cents per share compared with $23 million or 21 cents per share in the year-ago quarter. Quarterly adjusted earnings per share of 20 cents were ahead of the Zacks Consensus Estimate of 16 cents. Revenues were up 1% year over year to $1,283 million, surpassing the Zacks Consensus Estimate of $1,241 million. (Read more: Telephone & Data Systems Beats on Earnings in Q2.)

2. In second-quarter 2016, GAAP net income of U.S. Cellular came in at $27 million or 32 cents per share compared with net income of $19 million or 23 cents in the year-ago quarter. Quarterly earnings per share of 32 cents were well ahead of the Zacks Consensus Estimate of 17 cents. Quarterly revenues of $980 million were up 0.4% year over year and ahead of the Zacks Consensus Estimate of $969 million. (Read more: United States Cellular Tops Q2 Earnings, Revenues.)

3. GAAP net income of TELUS was approximately $323 million, up 22% year over year. GAAP earnings per share were 54 cents, up 25% year over year. Second-quarter adjusted earnings per share were also 54 cents, ahead of the Zacks Consensus Estimate of 52 cents. Total revenue came in at approximately $2,444 million, up 1.5% year over year and ahead of the Zacks Consensus Estimate of $2,427 million. (Read more: TELUS Beats Earnings and Revenue Estimates in Q2.)

4. CenturyLink posted second-quarter 2016 adjusted earnings per share of 63 cents, surpassing the Zacks Consensus Estimate of 59 cents. GAAP net income was $196 million or 36 cents per share compared with $143 million or 26 cents per share in the prior-year quarter. Quarterly total revenue of $4,398 million was down 0.5% from the prior-year quarter and was slightly below the Zacks Consensus Estimate of $4,401 million. (Read more: CenturyLink Q2 Earnings Top, Revenues Lag Estimate.)

5. On a GAAP basis, quarterly net income of Cincinnati Bell came in at $75 million or 35 cents per share compared with net income of $189 million or 85 cents in the year-ago quarter. However, adjusted earnings per share of 1 cent fell marginally short of the Zacks Consensus Estimate of 2 cents. Quarterly total revenue was $299.2 million, up 5% year over year and exceeded the Zacks Consensus Estimate of $294 million. (Read more: Cincinnati Bell Misses Q2 Earnings, Keeps 2016 View.)

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 America Movil, which gained a considerable 5.05%, 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. America Movil was the sole exception. Among the stocks that gained significantly were T-Mobile US (36.53%), DISH Network (NASDAQ:DISH) (28.10%), Sprint (25.61%), Comcast (NASDAQ:CMCSA) (20.44%) and AT&T (NYSE:T) (18.58%).

What’s Next in the Telecom Sector?

We do not foresee any significant changes in the telecom industry or overall global economic factors that can affect the industry in the coming week. Consequently, we expect stocks to trade in line with the broader market movement.