As the Q4 earnings season wraps, let’s dig into this quarter’s best and worst performers in the terrestrial telecommunication services industry, including U.S. Cellular (NYSE:USM) and its peers.
Terrestrial telecommunication companies face an uphill battle, as they mostly sell into a deflationary market, where the price of moving a bit tends to decrease over time with better technology. Without dependable volume growth, revenue growth could be challenged. Unfortunately, broadband penetration in their core US market is quite high already. On the other hand, data consumption from streaming entertainment and 5G expansion could provide a floor on growth for the next number of years. As if that wasn't enough to worry about, competition is intense, with larger telecom providers and hyperscalers expanding their own networks.
The 4 terrestrial telecommunication services stocks we track reported a very strong Q4. As a group, revenues beat analysts’ consensus estimates by 0.8%.
Amidst this news, share prices of the companies have had a rough stretch. On average, they are down 18.9% since the latest earnings results.
U.S. Cellular (NYSE:USM)
Operating as a majority-owned subsidiary of Telephone and Data Systems since its founding in 1983, US Cellular (NYSE:USM) is a regional wireless telecommunications provider serving 4.6 million customers across 21 states with mobile phone, internet, and IoT services.
U.S. Cellular reported revenues of $970 million, down 3% year on year. This print exceeded analysts’ expectations by 0.6%. Overall, it was an exceptional quarter for the company with an impressive beat of analysts’ EPS estimates.
"In 2024, UScellular made significant progress in enhancing shareholder value, while remaining steadfast in its mission of connecting people to what matters most," said Laurent Therivel, UScellular President and CEO.
U.S. Cellular Total Revenue
U.S. Cellular achieved the fastest revenue growth of the whole group. The results were likely priced in, however, and the stock is flat since reporting. It currently trades at $66.71.
With approximately 350,000 route miles of fiber optic cable spanning North America and the Asia Pacific, Lumen Technologies (NYSE:LUMN) operates a vast fiber optic network that provides communications, cloud connectivity, security, and IT solutions to businesses and consumers.
Lumen reported revenues of $3.33 billion, down 5.3% year on year, outperforming analysts’ expectations by 4.2%. The business had a stunning quarter with a solid beat of analysts’ EPS estimates.
Lumen Total Revenue
Lumen delivered the biggest analyst estimates beat among its peers. Although it had a fine quarter compared its peers, the market seems unhappy with the results as the stock is down 33.3% since reporting. It currently trades at $3.35.
Operating a massive network spanning 20,000 miles of fiber optic cable and connecting to over 3,200 buildings worldwide, Cogent Communications (NASDAQ:CCOI) provides high-speed Internet access, private network services, and data center colocation to businesses and bandwidth-intensive organizations across 54 countries.
Cogent reported revenues of $252.3 million, down 7.3% year on year, falling short of analysts’ expectations by 2.5%. Still, it was a satisfactory quarter as it posted a solid beat of analysts’ EPS estimates.
Cogent delivered the weakest performance against analyst estimates and slowest revenue growth in the group. As expected, the stock is down 34.1% since the results and currently trades at $52.78.
Operating primarily through its majority-owned subsidiary UScellular and wholly-owned TDS Telecom, Telephone and Data Systems (NYSE:TDS) provides wireless, broadband, video, and voice communications services to 4.6 million wireless and 1.2 million broadband customers across the United States.
Telephone and Data Systems reported revenues of $1.24 billion, down 5.5% year on year. This number topped analysts’ expectations by 1%. Overall, it was an exceptional quarter as it also put up a solid beat of analysts’ EPS estimates.
The stock is down 8.6% since reporting and currently trades at $36.21.
The Fed’s interest rate hikes throughout 2022 and 2023 have successfully cooled post-pandemic inflation, bringing it closer to the 2% target. Inflationary pressures have eased without tipping the economy into a recession, suggesting a soft landing. This stability, paired with recent rate cuts (0.5% in September 2024 and 0.25% in November 2024), fueled a strong year for the stock market in 2024. The markets surged further after Donald Trump’s presidential victory in November, with major indices reaching record highs in the days following the election. Still, questions remain about the direction of economic policy, as potential tariffs and corporate tax changes add uncertainty for 2025.
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