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The telecom sector has been maintaining decent returns so far this year. This is evident from the 9.5% year-to-date gain of the S&P Telecom Select Industry Index. The sector is gaining from the fifth-generation wireless technology or 5G, which will be a game changer when fully implemented. In fact, major telecom companies have started rolling out 5G service in limited areas (read: Top-Ranked ETFs That Crushed the Market in a Month).
Let’s take a look at some big telecom earnings releases and if these can impact the ETFs exposed to the space.
Earnings in Focus
On Oct 25, Verizon Communications Inc. VZ reported third-quarter 2019 adjusted earnings of $1.25 per share compared with $1.22 in the year-earlier quarter. Earnings beat the Zacks Consensus Estimate by a penny. Consolidated GAAP revenues rose 0.9% year over year to $32.89 billion and beat the Zacks Consensus Estimate of $32.72 billion.
For 2019, Verizon reiterated its earlier guidance on underlying strength of its business model and healthy momentum in its wireless business. Adjusted earnings per share are likely to increase low single digits, while GAAP revenues are expected to increase low single-digit percentage rates on expected savings from tax reform and higher cash flow from operations. Capital expenditures for 2019 are projected in the range of $17 billion to $18 billion. As of Nov 12, the stock lost around 2.1% since the earnings release.
On Oct 28, AT&T Inc. T reported relatively tepid third-quarter 2019 results with a year-over-year decline in GAAP earnings and revenues due to lower-than-anticipated performance by legacy wireline services and WarnerMedia businesses. Excluding non-recurring items, adjusted earnings in the quarter were 94 cents per share compared with 90 cents a year ago. The bottom line exceeded the Zacks Consensus Estimate by a penny. Quarterly GAAP operating revenues declined 2.5% year over year to $44.59 billion. The top line missed the Zacks Consensus Estimate of $45.01 billion.
Management has issued a healthy guidance for 2020 and expects adjusted earnings in the range of $3.60 to $3.70 per share on revenue growth of 1-2%. Free cash flow is expected to be stable at $28 billion with non-core asset monetization of $5-$10 billion. Adjusted EBITDA margin is expected to remain steady compared with 2019 levels. As of Nov 12, the stock gained 6.1% since the earnings release.
On Nov 6, CenturyLink, Inc. CTL reported mixed third-quarter 2019 results, wherein the top line beat the Zacks Consensus Estimate but the bottom line lagged the same. Net income (excluding integration and transformation costs, and special items) came in at $328 million or 31 cents per share compared with $327 million or 30 cents a year ago. The bottom line, however, missed the Zacks Consensus Estimate by a penny. Quarterly operating revenues declined 3.6% year over year to $5.61 billion. The top line beat the consensus estimate of $5.55 billion.