Telecom Stock Roundup: AT&T & Ericsson's Q1 Earnings Match Estimates, & More

Over the past five trading days, telecom stocks witnessed a brief uptrend followed by a relatively flat trajectory since the industry pinned hopes on a likely consumer resilience in the domestic market as various states intend to reopen their economies soon. With President Trump proclaiming that the country has passed the ‘coronavirus peak’, some states are expected to resume to normalcy as early as this week. However, with the initial trend in the earnings performance being less than impressive, the industry scripted a sharp downtrend toward the latter part of the week. This, in turn, negated the feel-good factor and triggered uncertainty within the overall industry.

Telecom firms have relentlessly provided the vital lifeline to countless humans as virtual communication has replaced in-person exchanges with social distancing and the work-from-home option in vogue. The firms have worked in unison to effectively handle the upsurge in data traffic, prompting the top administration to remain effusive about their contribution in the hour of crisis. Despite the enhanced efforts, telecom firms have incurred higher costs associated with bad debt, production shutdowns and expenses related to retail store closures leading to lower equipment sales and lower advertising revenues. Moreover, companies are forced to redraw their distribution channels for evolving customer demands, redefine business plans to optimize operations and increase efficiencies to lower costs while supporting employees and customers with various financial packages.

Meanwhile, the Trump administration is reportedly inching closer to declare all China-based telecommunication operations as national security threats. The restriction on mobile networks and broadband providers from China is the latest bone of contention between the two superpowers as the communist nation continues making investments to gain dominance in 5G. The Trump administration seeks to accelerate 5G deployments as it realizes the benefits of AI, data science and IoT in effectively tracking people affected by COVID-19, delivering medical supplies and developing drugs. It appears that under the given circumstances, it is extremely imperative for the U.S. telecom industry to emerge stronger from the virulent attack — the sooner, the better.

Regarding company-specific news, quarterly earnings, strategic deals and collaborations for the 5G network primarily took the center stage over the past five trading days.

Recap of the Week’s Most Important Stories

1.     AT&T Inc. T reported relatively modest first-quarter 2020 results as the pandemic hit top-line growth, fueling uncertainty within the organization and limiting future visibility. Despite the worldwide mayhem that led to short-term financial impacts, the company expects to continue investing in key areas and adjust its business according to the demand of the situation to fuel long-term growth, while maintaining a healthy dividend payment and actively reducing debt.

Excluding non-recurring items, adjusted earnings were 84 cents per share compared with 86 cents in the year-earlier quarter. Adjusted earnings for the first quarter were in line with the Zacks Consensus Estimate. Quarterly GAAP operating revenues decreased 4.6% year over year to $42,779 million and missed the Zacks Consensus Estimate of $44,213 million.
 
2.      Ericsson ERIC reported unimpressive first-quarter 2020 results, with the top line missing the Zacks Consensus Estimate.

Net income in the March quarter was SEK 2,156 million ($223 million) or SEK 0.65 (8 cents) per share compared with SEK 2,317 million or SEK 0.70 per share in the prior-year quarter. The bottom line was in line with the Zacks Consensus Estimate. Quarterly net sales inched up 1.7% year over year to SEK 49,750 million ($5,145 million). The top line, however, lagged the consensus mark of $5,545 million.

3.      Badger Meter, Inc. BMI reported impressive first-quarter 2020 results, with net earnings and revenues increasing year over year.

Quarterly net earnings were $11.9 million or 41 cents per share compared with $10.8 million or 37 cents per share in the year-ago quarter. The year-over-year improvement in the bottom line can be primarily attributed to higher revenues. The bottom line surpassed the Zacks Consensus Estimate by a penny. Despite the slowdown in economies globally caused by the coronavirus outbreak, net sales increased to $108.5 million from $104.9 million in the year-ago quarter. The top line met the consensus mark of $109 million.

4.      In a concerted effort to address the upsurge in data demand amid the pandemic, Nokia Corporation NOK recently announced its collaboration with mobile network operator, United States Cellular Corporation.

Nokia will be supporting U.S. Cellular with its Airscale Radio Access Network to shore up connectivity at 250 cell sites for customers dwelling in California, Wisconsin, Oregon and Washington. With millions of people staying indoors, the latest move underscores the Finland-based equipment maker’s commitment to deploy its avant-garde fiber optic and wireless networks to help users avert exposure to the deadly virus.

5.       Juniper Networks, Inc. JNPR has announced that its Wireless LAN platform from subsidiary — Mist Systems — has been selected by a leading Belgium-based transportation and logistics company, Transports Vervaeke.

Impressively, with two acquisitions in the last three years, the logistics firm has almost doubled in size and amplified its scale of operations. The company now aims to tap Mist’s WiFi Assurance software for digital transformation and improvement in the agility and flexibility of its business.

Price Performance

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

In the past five trading days, Juniper has been the biggest gainer with its share price increasing 5.6%, while CenturyLink has been the biggest decliner with its stock decreasing 4.1%.

Over the past six months, T-Mobile has been the sole performer with its stock appreciating 9.6%, while CenturyLink was the biggest decliner with its stock falling 31.6%.

Over the past six months, the Zacks Telecommunications Services industry declined 15.1%, while the S&P 500 recorded an average loss of 9%.

What’s Next in the Telecom Space?

In addition to product launches, deals and 5G deployments, all eyes will remain glued to the upcoming earnings season and how the administration attempts to mitigate the virus’s overall impact on the industry.

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AT&T Inc. (T) : Free Stock Analysis Report
 
Nokia Corporation (NOK) : Free Stock Analysis Report
 
Badger Meter, Inc. (BMI) : Free Stock Analysis Report
 
Juniper Networks, Inc. (JNPR) : Free Stock Analysis Report
 
Ericsson (ERIC) : Free Stock Analysis Report
 
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