Telecom Stock Roundup: Verizon, AT&T Disappoint In Q1; T-Mobile US Outperforms

The telecom space was predominantly buzzing with earnings news last week. Notably, U.S. telecom behemoths Verizon Communications Inc. (NYSE:VZ) and AT&T Inc. (NYSE:T) reported weak results. Verizon Communications’ top line as well as bottom line fell below the Zacks Consensus Estimate while AT&T’s bottom line matched the Zacks Consensus Estimate but top line missed the same.

During the reported quarter, Verizon lost 0.307 million postpaid customers (compared with a gain of 0.640 customers in the prior-year quarter) while prepaid customer count decreased by 0.017 million. In contrast, AT&T recorded 2.7 million net additions of wireless subscribers. Of the total, 2.1 million net additions were in the U.S., driven by prepaid and connected devices with another 633,000 net additions recorded in Mexico.

Meanwhile, T-Mobile US Inc. (NYSE:T) reported strong financial results in the first quarter of 2017 wherein both the top line and bottom line outpaced the Zacks Consensus Estimate. In the reported quarter, T-Mobile US added net 0.798 branded postpaid phone customers, 0.116 branded postpaid mobile broadband customers and 0.386 branded prepaid customers but lost 0.158 wholesale customers. Total net customer addition was 1.142 million, signifying the 16th successive quarter of over 1 million net customer additions.

In the chipset front, Qualcomm Inc. (NASDAQ:QCOM) , the largest mobile chipset developer based on baseband technology, reported mixed financial results for the second quarter of fiscal 2017 (ended Mar 31, 2017) wherein the bottom line outshined the Zacks Consensus Estimate but the top line missed the same. During the fiscal second quarter, Qualcomm shipped approximately 179 million CDMA-based MSM (Mobile Station Modem) chipsets, reflecting a decline of 5% year over year.

Leading wireless tower operator Crown Castle International Corp. (NYSE:CCI) also reported impressive financial results for the first quarter of 2017. The company’s top line as well as bottom line surpassed the Zacks Consensus Estimate. Crown Castle International currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Apart from the earnings news during the last week, the U.S. telecom regulator – Federal Communications Commission (FCC) – voted 2-1 to withdraw most of the stringent regulatory requirements to reform the business data service (BDS) market that was introduced by the previous FCC body. Service providers such as AT&T, Verizon, CenturyLink Inc. (NYSE:T) , Comcast Corp. (NASDAQ:CMCSA) and Frontier Communications Corp. (NYSE:T) are likely to gain from the FCC’s new decision.

Read the last Telecom Stock Roundup for Apr 20, 2017.

Recap of the Week’s Most Important Stories

1. Quarterly GAAP net income of Verizon was $3,553 million or 85 cents per share compared with $4,430 million or $1.06 per share in the year-ago quarter. Adjusted earnings per share came in at 95 cents in the reported quarter, below the Zacks Consensus Estimate of 98 cents.Total revenue decreased 7.3% year over year to $29,814 million, missing the Zacks Consensus Estimate of $30,504 million. (Read more: Verizon Misses Earnings and Revenue Estimate in Q1)

2. On a GAAP basis, AT&T reported net income of $3,469 million or 56 cents per share compared with $3,803 million or 61 cents, in the year-ago quarter. Quarterly adjusted earnings per share were 74 cents, in line with the Zacks Consensus Estimate.Quarterly total revenue dropped 2.9% year over year to $39,365 million but fell below the Zacks Consensus Estimate of $40,661 million. (Read more: AT&T Q1 Earnings In Line with Estimates, Revenues Miss)

3. T-Mobile US’ GAAP net income in the reported quarter was $698 million or 80 cents per share compared with net income of $479 million or 56 cents in the year-ago quarter. Quarterly adjusted (excluding non-recurring items) earnings per share of 46 cents were well above the Zacks Consensus Estimate of 35 cents. Total revenue jumped 11% year over year to $9,613 million in the reported quarter surpassing the Zacks Consensus Estimate of $9,596 million. (Read more: T-Mobile US Tops Q1 Earnings & Revenue Estimates)

4. On a GAAP basis, quarterly net income of Qualcomm came in at $749 million or 50 cents per share compared with $1,164 million or 78 cents in the year-ago quarter. Adjusted earnings per share were $1.20, ahead of the Zacks Consensus Estimate of $1.05.Total revenue of $5,016 million not only decreased 9.64% year over year, but also failed to beat the Zacks Consensus Estimate of $5,876.8 million.(Read more: Qualcomm Q2 Earnings Beat Estimates, Revenues Miss)

5. Crown Castle Internationalreported quarterly earnings per share of $1.24, beating the Zacks Consensus Estimate of $1.16. Likewise, GAAP net income rose a whopping 149% year over year to $119.1 million. Total revenue in the reported quarter increased 8.7% year over year to $1,015.9 million, beating the Zacks Consensus Estimate of $1,009 million. (Read more: Crown Castle Beats on Earnings and Revenues in Q1)

Price Performance

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

In the last five trading sessions, share price movement of most of the major telecom stocks was positive barring Verizon. American Movil (5.51%), DISH Network (NASDAQ:DISH) (5.41%), Sprint (4.20%), T-Mobile US (4.12%) and Comcast (3.32%) gained substantially while Verizon (4.90%) lost the most.

Likewise, in the last six months, the price performances of the major telecom stocks were positive barring Verizon. Among the stocks that gained substantially are Sprint (41.65%), Charter Communications (NASDAQ:CHTR) (41.50%), T-Mobile US (36.53%), America Movil (30.12%), Comcast (26.19%), Telefonica (MC:TEF) (13.62%) and AT&T (10.73%).

What’s Next in the Telecom Space?

We expect a busy week ahead for the telecom sector as behemoths like Comcast, Sprint, Charter Communications, DISH Network, American Tower, Level 3 Communications and Frontier Communications will release their quarterly financial results. The market will closely evaluate these results in order to assess industry dynamics and future growth prospects.

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