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Telecom Stock Roundup: Sprint, Infinera, Charter Communications Results Impress

Zacks

The last week looked like a bad spell for the telecom sector. Almost all major telecom stocks lost value in line with the broader market (the S&P 500) movement. Very few developments took place save the scheduled earnings releases.

National Wireless Carrier Sprint Corp. S reported better-than-expected financial results in the third quarter of fiscal 2017. Total revenues were above the Zacks Consensus Estimate while loss per share came in better.

Sprint reported net additions of 3,85,000 wireless customers, including postpaid net gain of 2,56,000, prepaid net additions of 63,000 and wholesale and affiliate net additions of 66,000. Sprint's focus on delivering the most attractive value proposition in wireless resulted in 1,84,000 postpaid phone net additions.

Leading cable MSO (multi service operator) Charter Communications Inc. CHTR reported impressive financial results for fourth-quarter 2017, wherein both the top and the bottom line outpaced the Zacks Consensus Estimate.

As of Dec 31, 2017, Charter Communications’ residential high-speed Internet subscribers increased 263,000 to 22.545 million. Voice subscribers grew 22,000 to 10.427 million. Importantly, video subscribers also increased 2,000 to 16.544 million. As of Dec 31, 2017, Charter Communications had 453,000 video, 1,358,000 high-speed Internet and 912,000 voice subscribers for the commercial segment.

Taiwanese telecom behemoth Chunghwa Telecom Co. Ltd. CHT posted strong financial results in fourth-quarter 2017. Quarterly total revenues were around $2,023 million, reflecting an increase of 10.3% year over year. Net earnings per American Depository Share were 37 cents, reflecting an increase of 19.4% from the year-ago quarter. Chunghwa currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Infinera Corp. INFN reported better-than-expected financial results in the fourth quarter of 2017. Total revenues were above the Zacks Consensus Estimate while loss per share was better than the same.

The U.S. wireless industry which performed pathetically in the most part of 2017 has shown a sign of turnaround. Importantly, all four national wireless carriers have gained postpaid subscribers in the last reported quarter.

T-Mobile US Inc. TMUS, Verizon Communications Inc. VZ, AT&T Inc. T and Sprint have gained a net 891,000, 431,000, 329,000 and 184,000 postpaid customers, respectively. In addition, Comcast Corp. CMCSA, the newly entered cable MSO in the wireless space also gained about 180,000 postpaid subscribers. Notably, Comcast operates as an MVNO (mobile virtual network operator) of Verizon.

Read the last Telecom Stock Roundup for Feb 02, 2018.

Recap of the Week’s Most Important Stories

1. On a GAAP basis, Sprint's third-quarter fiscal 2017 net income was $7,162 million or $1.79 per share against a net loss of $479 million or 12 cents in the year-ago quarter. However, after adjusting a one-time tax gain, fiscal third-quarter net loss was 2 cents compared with the Zacks Consensus Estimate of a loss of 4 cents. Quarterly total revenues totaled $8,239 million, down 3.6% year over year and above the Zacks Consensus Estimate of $8,178.2 million. (Read more: Sprint Betters Estimates in Q3 Earnings, Revenues Beat)

2. GAAP net income of Charter Communications in the reported quarter was $9,553 million or $34.56 per share compared with net income of $454 million or $1.67 in the year-ago quarter. However, adjusted earnings per share of 86 cents came in a penny above the Zacks Consensus Estimate. Fourth-quarter 2017 total revenues of $10,602 million increased 3.2% year over year surpassing the Zacks Consensus Estimate of approximately $10,583 million. (Read more: Charter Communications' Q4 Earnings Top Estimates)

3. As of Dec 31, 2017, Chunghwa’s total broadband subscriber base was more than 4.46541 million, of which FTTx subscriber base accounted for 79.5%, with around 3.55 million subscribers. Broadband subscribers signing up for 100 Mbps or higher speed connections were more than 1.28 million, up 9.5% year over year. HiNet subscriber base totaled 3.73 million, down 0.7% year over year. Mobile subscriber base was 10.45 million, down 3.1% year over year. Mobile Internet subscriber base totaled 7.35 million, increasing 7.2% year over year. 4G wireless subscribers base is at 7.99 million. The International /Domestic Fixed-line subscriber base was 10.69 million. (Read more: Chunghwa Telecom Q4 Earnings and Revenues Grow Y/Y)

4. Infinera reported net loss on a GAAP basis of $74.0 million or a loss of 50 cents per share against net income of $36.3 million or 25 cents in the year-ago quarter. Infinera’s adjusted loss of 12 cents was a penny below than the Zacks Consensus Estimate. Total revenues were $195.8 million, up 8.2% year over year and ahead of the Zacks Consensus Estimate of $189.8 million. (Read more: Infinera Betters Q4 Earnings Estimates, Revenues Beat)

5. Postpaid customers are those who are billed monthly and considered more profitable to telecom operators. Interestingly, all five major wireless operators have gained considerable postpaid customers despite cut-throat pricing competition in the industry resulting in unlimited data plans with several sweeteners. We believe the Q4 trend of positive postpaid subscriber gain on the part of U.S. national wireless carriers will continue in 2018. (Read more: Can Wireless Operators Maintain Q4 Postpaid Gain in 2018?)

Price Performance

The following table shows the price movement of the major telecom stocks both in the last week and last six months.

CompanyLast WeekLast 6 Months
VZ-6.83%4.40%
T-2.34%-4.13%
TMUS-4.83%-3.42%
S2.61%-36.08%
TEF-9.48%-16.67%
AMX-5.74%0.22%
CMCSA-6.19%1.36%
CHTR-3.57%-4.59%
DISH-4.43%-24.88%

In the last five trading sessions, share price movement of all major telecom stocks was negative barring Sprint. Telefonica, Verizon, Comcast, America Movil, T-Mobile US, DISH Network lost significantly in the same time frame. Likewise, price performances of most of the major telecom stocks were negative in the last six months. Sprint, DISH Network and Telefonica suffered major reverses in the stock price in the same time period.

What’s Next in the Telecom Space?

We expect heightened activities in the telecom industry over the next week as big names like America Movil, Liberty Global, CenturyLink and Cincinnati Bell will release their fourth-quarter 2017 financial results. The market will closely evaluate these quarterly results in a bid to assess industry dynamics and growth prospects.

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