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Telephone and Data Systems (TDS): Earnings Preview for Q3

Telephone and Data Systems Inc. TDS is slated to report third-quarter 2017 results on Nov 8, before the opening bell.

In the last four quarters, the company’s earnings display a mixed earnings surprise history. The company’s bottom line matched the Zacks Consensus Estimate in one and lagged the same in two of the previous four quarters. The company’s earnings beat the Zacks Consensus Estimate in only one of the last four quarters, with an average beat of 788.46%.

Let’s see how things are shaping up for this announcement.

Factors at Play

Telephone & Data Systemscontinues to compete with the likes of CenturyLink Inc. CTL and Frontier Communications Corp. FTR, to name a few. Additionally, the company’s wireless division – United States Cellular Corp. USM – continues to operate in an intensely competitive wireless market and remains significantly challenged by the offering of service plans from lower-cost mobile operators. We further believe that high costs associated with network integration and construction of new cell sites, aggressive equipment pricing, increasing capacity in existing cell sites, wireless technology upgrades and spectrum licensing will put considerable pressure on the company’s finances.

Telephone and Data Systems, Inc. Price and EPS Surprise

 

We believe these headwinds have led to the dismal price performance of Telephone & Data Systems. Over the past three months, shares of Telephone & Data Systems have lost 5.0% compared with the industry’s decline of 4.5%.

Meanwhile, Telephone and Data Systems is looking out for opportunities to bring more fiber in order to better address services, both in its current footprint and adjacent areas. By leveraging on fiber, the telco is trying to meet the growing demand for TV and broadband services. The company continues to expand its business in the managed hosting and cloud service market. Launch of Shared Data plans at nominal prices should help the company gain consumers. It continues to experience strong smartphone demand at its wireless wing — U.S. Cellular.

At the end of the last reported second-quarter 2017, the service provider claimed to have expanded about 19% of its network route miles with fiber. The telco’s fiber network investments are also driving positive results in consumer services like Internet Protocol TV (IPTV). Its IPTV connections grew 12.1% year over year to 46,200, with a net addition of 5,000 connections compared with the prior-year figure. Additionally, more customers are opting for higher speeds, including 1 Gbps, in the company’s FTTH-enabled markets.

Total cable connections were 297,000, up 3.3% year over year. Broadband Connections totaled 140,300, up 11.6%. We expect this trend to reflect in the upcoming quarterly results.

Dividend Payment

We appreciate Telephone and Data Systems’ decision to reward shareholders with a third-quarter 2017 dividend of 15.5 cents per Common Share and Series A Common Share, payable on Sep 29 2017, to shareholders of record as of Sep 15 2017. The move indicates the company’s commitment to create value for shareholders and underlines its confidence in business growth.

As investors prefer an income-generating stock, a high dividend-yielding firm is much coveted. Investors are always on the lookout for companies with a track record of consistent and incremental dividend payments.

Key Pick

Here is a company in the broader Utilitiessector – which houses Telephone and Data Systems–that has the right combination of elements to post an earnings beat this quarter.

TELUS Corporation (TU) has an Earnings ESP of +1.80% and a Zacks Rank #3 (Hold). You can see https://www.zacks.com/stocks/buy-list/?ADID=zp_1link&ICI... _1link">the complete list of today’s Zacks #1 Rank(Strong Buy) stocks here.

The company will release third-quarter 2017 financial results on Nov 9. The company’s earnings surpassed the Zacks Consensus Estimate in one of the previous four quarters.

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Telephone and Data Systems, Inc. (TDS): Free Stock Analysis Report
 
CenturyLink, Inc. (CTL): Free Stock Analysis Report
 
Frontier Communications Corporation (FTR): Free Stock Analysis Report
 
United States Cellular Corporation (USM): Free Stock Analysis Report
 
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