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Telecom Stock Roundup: American Tower Posts Strong Q1 while Charter Communications Disappoints, Sprint Posts a Mixed Bag

Last week looked like a bad spell for the telecom sector. Most of the major telecom stocks lost value, in line with the broader market (the S&P 500) movement, mainly attributable to weaker-than-expected earnings results of leading technology and telecom stocks. Specifically, the year-over-yeardrop in iPhone sales for the tech giant Apple Inc. AAPL was a major concern.

Several leading sector participants revealed their first-quarter 2016 financial numbers in the past five trading days. Wireless tower operator American Tower Corp. AMT, regional telecom operator Frontier Communications Corp. FTR and cable MSO giant Time Warner Cable Inc. TWC reported strong financial results wherein the top and bottom lines outpaced the Zacks Consensus Estimate.

Leading national telecom operator Sprint Corp. S however posted a mixed bag for the fourth quarter of fiscal 2015 with revenues outpacing the Zacks Consensus Estimate and earnings lagging the same. On the other hand, cable MSO Charter Communications Inc. CHTR and Internet backbone provider Level 3 Communications Inc. LVLT reported weak financial results in the first quarter of 2016 with both top and bottom lines falling short of the Zacks Consensus Estimate.

In the reported quarter, Sprint gained 56,000 postpaid subscribers, 655,000 wholesale customers but lost 264,000 prepaid customers. As of Mar 31, 2016, Sprint had 58.806 million wireless customers, up 4.8% year over year. This includes 30.951 million postpaid, 14.397 million prepaid and 13.458 million wholesale customers.

For Time Warner Cable, in first-quarter 2016, the Residential segment video subscriber count increased by 21,000 to 10.842 million. High-speed data subscribers rose by 314,000 to 12.989 million. The voice subscriber tally increased 178,000 to 6.498 million. At the Business segment, the video subscriber count remained flat at 214,000. High-speed data subscribers rose by 13,000 to 651,000. The voice subscriber tally went up 11,000 to 386,000.

As of Mar 31, 2016, Charter Communications had 4.332 million video, 5.368 million high-speed Internet and 2.633 million voice customers. During the reported quarter, the company gained 10,000 video, 141,000 high-speed Internet and 35,000 voice customers at the Residential segment. At the Business segment, the company had 113,000 video, 359,000 high-speed Internet and 231,000 voice subscribers. During the reported quarter, the company added 5,000 video customers, 14,000 high-speed Internet and 13,000 voice customers.

Meanwhile, Frontier Communications had 2,486,700 high-speed broadband subscribers and 543,400 video customers. In the reported quarter, the company gained 24,600 high-speed broadband customers but lost 10,300 video subscribers.

Canadian leading telecom operator BCE Inc. BCE also reported disappointing financial results in the first quarter of 2016, with both the top and bottom line lagging the Zacks Consensus Estimate.During the reported quarter, BCE added a net of 25,805 postpaid wireless subscribers.Bell Wireline added a net of 19,783 high-speed Internet customers and 47,740 Fibe TV customers, but lost 37,741 satellite TV subscribers.

Spanish telecom giant Telefonica S.A. TEF reported weak financial results in the first quarter of 2016. Both earnings per ADS (American Depository Share) and total revenue declined year over year. However, its Brazilian subsidiary, Telefonica Brasil SA VIV, reported mixed financial results. The company’s earnings beat the Zacks Consensus Estimate while revenues lagged the same.

Chunghwa Telecom Co. Ltd. CHT, the largest integrated telecom operator in Taiwan, declared mixed financial results in the first quarter of 2016. While net earnings per ADS witnessed an improvement, total revenue declined year over year.

Read the last  Telecom Stock Roundup for Apr 28, 2016.

Recap of the Week’s Most Important Stories

1.    American Tower’s first quarter adjusted funds from operations of $602.5 million or $1.41 per share in the quarter improved from the year-ago figure of $513.6 million or $1.25 per share. Moreover, the bottom line surpassed the Zacks Consensus Estimate of $1.25.Total revenue of $1,289 million increased 19.5% year over year and beat the Zacks Consensus Estimate of $1,287 million.  (read more:American Tower Beats on Q1 Earnings & Revenues.)

2.    GAAP net income of Time Warner Cable came in at $494 million or $1.72 per share, up from $458 million or $1.59 per share in the prior-year quarter. Quarterly adjusted (excluding special items) earnings per share of $1.81 beat the Zacks Consensus Estimate of $1.73.First quarter revenues came in at $6,191 million, up 7.2% year over year and ahead of the Zacks Consensus Estimate of $6,119 million.   (read more:Time Warner Cable Tops Q1 Earnings and Revenues.)

3.    In the fourth quarter of fiscal 2015, Sprint reported a net loss of $554 million or 14 cents per share, wider than a net loss of $224 million or 6 cents per share in the year-ago quarter. Fourth-quarter net loss per share was also wider-than-the Zacks Consensus Estimate of a loss of 12 cents. Quarterly total revenue came in at $8,071 million, down 2.5% year over year but ahead of the Zacks Consensus Estimate of $8,002 million. (read more: Sprint Q4 Loss Wider than Expected, Revenues Beat.)

4.    GAAP net loss of Charter Communications in the reported quarter came in at $188 million or $1.68 per share compared with a net loss of $81 million or a loss of 73 cents per share in the year-ago quarter. Quarterly loss per share was significantly wider than the Zacks Consensus Estimate of a loss of 84 cents. First-quarter 2016 total revenue of $2,530 million increased 7.1% year over year, but missed the Zacks Consensus Estimate of $2,533 million. (read more:Charter Communications Q1 Loss Wider than Expected.)

5.    On a GAAP basis, net income of Level 3 Communications in the first quarter was $124 million, or 34 cents per share compared with net income of $122 million, or 35 cents per share in the first quarter of 2015. Quarterly earnings per share of 34 cents were well below the Zacks Consensus Estimate of 45 cents.First quarter total revenue was $2,051 million, flat year over year but short of the Zacks Consensus Estimate of $2,078 million. (read more:Level 3 Communications Q1 Earnings, Revenues Lag.)

Price Performance

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

Company

Last Week

Last 6 Months

VZ

-1.64%

12.73%

T

0.41%

19.23%

S

-5.71%

-22.54%

TMUS

-1.66%

0.62%

VOD

-3.43%

-2.10%

CHL

-4.41%

-8.24%

AMX

-15.93%

-22.73%

CMCSA

-0.67%

-0.05%

DISH

-7.88%

-27.54%

Over the last five trading sessions, share price movement of the major telecom stocks was negative barring AT&T which gained a marginal 0.41%. America Movil (15.93%), DISH Network (7.88%) and Sprint (5.71%) lost substantial value in the last five sessions.

Likewise, over the last six months, the price performance of most of the key telecom stocks was negative. Among the stocks that depreciated most were DISH Network (27.54%), America Movil (22.73%) and Sprint (22.54%). On the other hand, AT&T (19.23%) and Verizon (12.73%) gained substantially over the last six months.

What’s Next in the Telecom Sector?

We do not foresee any significant change in the telecom industry, nor do we see any macroeconomic factors affecting the industry in the coming week. Therefore, we expect stocks to trade in line with the broader market movement.  

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AMER TOWER CORP (AMT): Free Stock Analysis Report
 
TELEFONICA S.A. (TEF): Free Stock Analysis Report
 
SPRINT CORP (S): Free Stock Analysis Report
 
LEVEL 3 COMM (LVLT): Free Stock Analysis Report
 
BCE INC (BCE): Free Stock Analysis Report
 
CHUNGHWA TELECM (CHT): Free Stock Analysis Report
 
TIME WARNER CAB (TWC): Free Stock Analysis Report
 
APPLE INC (AAPL): Free Stock Analysis Report
 
FRONTIER COMMUN (FTR): Free Stock Analysis Report
 
TELEF BRASIL SA (VIV): Free Stock Analysis Report
 
CHARTER COMM-A (CHTR): Free Stock Analysis Report
 
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