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Telecom Stock Roundup: Qualcomm & Nokia Surpass Earnings Estimates & More
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The U.S. telecom stocks witnessed a gradual uptrend in the past week as the earnings season picked up pace amid simmering geopolitical tensions. The quarterly performance of hitherto reported companies has been a mixed bag with better-than-expected bottom-line figures, despite broad-based revenues hit by the coronavirus-induced turmoil. However, the estranged Sino-U.S. relationship with ebbing diplomatic ties remained a latent threat as the Trump administration continued its relentless pursuit to safeguard national interests as it vowed to protect American data from being siphoned off through unlawful access. The government continued with its confidence-building administrative efforts to set guardrails and legislations to lend support to domestic telecommunication companies and protect sovereign interests.
The White House is reportedly inching closer to seek a ban on TikTok, WeChat and other Chinese apps that are allegedly being used as cyber espionage tools to gain access to sensitive American data. The government has indicated that if TikTok’s U.S. operations are acquired by domestic firms like Microsoft, it would allow the firm to operate in the country. The Trump administration is further aiming to rip off Chinese apps from American mobile app marketplaces. At the same time, it is also preventing Chinese hardware manufacturers from pre-installing popular American apps on their devices.
Under the ‘Clean Cloud’ initiative, the administration has even called for American data privacy, preventing their access and storage on cloud-based systems run by firms such as Alibaba, Baidu, China Mobile, China Telecom and Tencent. These factors have likely created a sense of security within the industry, triggering the uptrend. Healthy quarterly results further re-imposed sector confidence as 5G deployments rolled out across the country and 5G handsets began gradually hitting the market.
Regarding company-specific news, earnings primarily took the center stage over the past five trading days.
Recap of the Week’s Most Important Stories
1. Despite a challenging macroeconomic environment triggered by the coronavirus pandemic, Qualcomm Incorporated (QCOM - Free Report) reported solid third-quarter fiscal 2020 results, primarily driven by the ramp-up in 5G-enabled chips. Both top and bottom-line figures beat the Zacks Consensus Estimates, backed by the strength of the business model and the ability to respond pro-actively to the evolving market scenario.
Quarterly non-GAAP net income came in at $982 million or 86 cents per share compared with $982 million or 80 cents in the year-ago quarter. Undeterred by the adverse impact of the virus outbreak, non-GAAP earnings remained steady owing to the diligent execution of operational plans and resilient business culture. The bottom line exceeded management’s guidance and beat the Zacks Consensus Estimate by 14 cents. Non-GAAP revenues for the reported quarter were $4,890 million compared with $4,894 million in the year-earlier quarter. The figure surpassed the consensus mark of $4,811 million and was above the midpoint of the company-guided range, driven by 5G strength, high-performing core chipsets and new RF front-end content.
2. Nokia Corporation (NOK - Free Report) reported healthy second-quarter 2020 results, with the bottom line beating the Zacks Consensus Estimate. The Finland-based telecom equipment maker delivered better-than-expected profitability and improvement in cash generation despite the coronavirus-induced challenges.
Non-IFRS profit came in at €316 million ($347.8 million) or €0.06 (7 cents) per share compared with €258 million or €0.05 per share in the prior-year quarter. The upside was driven by higher gross profit in Mobile Access within Networks, progress related to the cost-savings program and a net positive fluctuation in financial income and expenses. The bottom line beat the Zacks Consensus Estimate by 4 cents. Second-quarter non-IFRS net sales were €5,093 million ($5,606 million) compared with €5,696 million in the prior-year quarter. The top line lagged the consensus mark of $5,632 million.
3. Altice USA, Inc. (ATUS - Free Report) reported healthy second-quarter 2020 results, with the top and bottom lines beating the Zacks Consensus Estimate. Despite a challenging macroeconomic environment, the company recorded solid customer additions, driven by resilience in the business model, and is likely to continue this growth momentum in the second half of the year.
Net income for the June quarter was $111.3 million or 19 cents per share compared with $86.4 million or 13 cents in the prior-year quarter. The improvement can be attributed to the top-line growth. The bottom line beat the Zacks Consensus Estimate by 4 cents. Second-quarter revenues increased to $2,475 million from $2,451.1 million in the year-earlier quarter, driven by record Broadband revenue growth of 14.2%. The top line surpassed the consensus mark of $2,422 million.
4. Arista Networks, Inc. (ANET - Free Report) reported decent second-quarter 2020 results, with both top and bottom lines beating the Zacks Consensus Estimate. However, both figures declined on a year-over-year basis.
Non-GAAP net income came in at $167 million or $2.11 per share compared with $198.6 million or $2.44 in the year-ago quarter. However, the bottom line beat the Zacks Consensus Estimate by 14 cents, with an earnings surprise of 7.1%. Quarterly total revenues fell 11.1% year over year to $540.6 million (but were at the upper end of the company’s guidance of $520-$540 million) due to COVID-19-related supply challenges. The top line, however, surpassed the consensus mark of $530 million.
5. Bandwidth Inc. (BAND - Free Report) reported impressive second-quarter 2020 financial results, with the top and bottom lines surpassing the Zacks Consensus Estimate. Higher CPaaS revenues and an accretive subscriber base backed by a strong business model bolstered Bandwidth’s financial performance.
On an adjusted basis, quarterly net income was $3.1 million or 13 cents per share against a net loss of $0.9 million or 4 cents in the year-ago quarter. The year-over-year improvement can be primarily attributed to adjustments owing to income tax expenses in the reported quarter. The bottom line beat the consensus mark by 13 cents. Quarterly revenues came in at $76.8 million compared with $56.8 million in the year-ago quarter primarily due to higher CPaaS revenues. The top line surpassed the consensus mark of $70 million.
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, Qualcomm has been the best performer with its stock rising 16.5%, while Arista Networks was the biggest decliner with its stock declining 5%.
Over the past six months, Qualcomm has been the best performer with its stock appreciating 21.5%, while CenturyLink was the biggest decliner with its stock falling 47.7%.
Over the past six months, the Zacks Telecommunications Services industry declined 9.6%, while the S&P 500 recorded break-even performance.
What’s Next in the Telecom Space?
In addition to the remaining earnings releases and 5G deployments, all eyes will remain glued to how the administration attempts to safeguard the interests of domestic firms from Chinese threats.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2021.
Image: Bigstock
Telecom Stock Roundup: Qualcomm & Nokia Surpass Earnings Estimates & More
The U.S. telecom stocks witnessed a gradual uptrend in the past week as the earnings season picked up pace amid simmering geopolitical tensions. The quarterly performance of hitherto reported companies has been a mixed bag with better-than-expected bottom-line figures, despite broad-based revenues hit by the coronavirus-induced turmoil. However, the estranged Sino-U.S. relationship with ebbing diplomatic ties remained a latent threat as the Trump administration continued its relentless pursuit to safeguard national interests as it vowed to protect American data from being siphoned off through unlawful access. The government continued with its confidence-building administrative efforts to set guardrails and legislations to lend support to domestic telecommunication companies and protect sovereign interests.
The White House is reportedly inching closer to seek a ban on TikTok, WeChat and other Chinese apps that are allegedly being used as cyber espionage tools to gain access to sensitive American data. The government has indicated that if TikTok’s U.S. operations are acquired by domestic firms like Microsoft, it would allow the firm to operate in the country. The Trump administration is further aiming to rip off Chinese apps from American mobile app marketplaces. At the same time, it is also preventing Chinese hardware manufacturers from pre-installing popular American apps on their devices.
Under the ‘Clean Cloud’ initiative, the administration has even called for American data privacy, preventing their access and storage on cloud-based systems run by firms such as Alibaba, Baidu, China Mobile, China Telecom and Tencent. These factors have likely created a sense of security within the industry, triggering the uptrend. Healthy quarterly results further re-imposed sector confidence as 5G deployments rolled out across the country and 5G handsets began gradually hitting the market.
Regarding company-specific news, earnings primarily took the center stage over the past five trading days.
Recap of the Week’s Most Important Stories
1. Despite a challenging macroeconomic environment triggered by the coronavirus pandemic, Qualcomm Incorporated (QCOM - Free Report) reported solid third-quarter fiscal 2020 results, primarily driven by the ramp-up in 5G-enabled chips. Both top and bottom-line figures beat the Zacks Consensus Estimates, backed by the strength of the business model and the ability to respond pro-actively to the evolving market scenario.
Quarterly non-GAAP net income came in at $982 million or 86 cents per share compared with $982 million or 80 cents in the year-ago quarter. Undeterred by the adverse impact of the virus outbreak, non-GAAP earnings remained steady owing to the diligent execution of operational plans and resilient business culture. The bottom line exceeded management’s guidance and beat the Zacks Consensus Estimate by 14 cents. Non-GAAP revenues for the reported quarter were $4,890 million compared with $4,894 million in the year-earlier quarter. The figure surpassed the consensus mark of $4,811 million and was above the midpoint of the company-guided range, driven by 5G strength, high-performing core chipsets and new RF front-end content.
2. Nokia Corporation (NOK - Free Report) reported healthy second-quarter 2020 results, with the bottom line beating the Zacks Consensus Estimate. The Finland-based telecom equipment maker delivered better-than-expected profitability and improvement in cash generation despite the coronavirus-induced challenges.
Non-IFRS profit came in at €316 million ($347.8 million) or €0.06 (7 cents) per share compared with €258 million or €0.05 per share in the prior-year quarter. The upside was driven by higher gross profit in Mobile Access within Networks, progress related to the cost-savings program and a net positive fluctuation in financial income and expenses. The bottom line beat the Zacks Consensus Estimate by 4 cents. Second-quarter non-IFRS net sales were €5,093 million ($5,606 million) compared with €5,696 million in the prior-year quarter. The top line lagged the consensus mark of $5,632 million.
3. Altice USA, Inc. (ATUS - Free Report) reported healthy second-quarter 2020 results, with the top and bottom lines beating the Zacks Consensus Estimate. Despite a challenging macroeconomic environment, the company recorded solid customer additions, driven by resilience in the business model, and is likely to continue this growth momentum in the second half of the year.
Net income for the June quarter was $111.3 million or 19 cents per share compared with $86.4 million or 13 cents in the prior-year quarter. The improvement can be attributed to the top-line growth. The bottom line beat the Zacks Consensus Estimate by 4 cents. Second-quarter revenues increased to $2,475 million from $2,451.1 million in the year-earlier quarter, driven by record Broadband revenue growth of 14.2%. The top line surpassed the consensus mark of $2,422 million.
4. Arista Networks, Inc. (ANET - Free Report) reported decent second-quarter 2020 results, with both top and bottom lines beating the Zacks Consensus Estimate. However, both figures declined on a year-over-year basis.
Non-GAAP net income came in at $167 million or $2.11 per share compared with $198.6 million or $2.44 in the year-ago quarter. However, the bottom line beat the Zacks Consensus Estimate by 14 cents, with an earnings surprise of 7.1%. Quarterly total revenues fell 11.1% year over year to $540.6 million (but were at the upper end of the company’s guidance of $520-$540 million) due to COVID-19-related supply challenges. The top line, however, surpassed the consensus mark of $530 million.
5. Bandwidth Inc. (BAND - Free Report) reported impressive second-quarter 2020 financial results, with the top and bottom lines surpassing the Zacks Consensus Estimate. Higher CPaaS revenues and an accretive subscriber base backed by a strong business model bolstered Bandwidth’s financial performance.
On an adjusted basis, quarterly net income was $3.1 million or 13 cents per share against a net loss of $0.9 million or 4 cents in the year-ago quarter. The year-over-year improvement can be primarily attributed to adjustments owing to income tax expenses in the reported quarter. The bottom line beat the consensus mark by 13 cents. Quarterly revenues came in at $76.8 million compared with $56.8 million in the year-ago quarter primarily due to higher CPaaS revenues. The top line surpassed the consensus mark of $70 million.
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, Qualcomm has been the best performer with its stock rising 16.5%, while Arista Networks was the biggest decliner with its stock declining 5%.
Over the past six months, Qualcomm has been the best performer with its stock appreciating 21.5%, while CenturyLink was the biggest decliner with its stock falling 47.7%.
Over the past six months, the Zacks Telecommunications Services industry declined 9.6%, while the S&P 500 recorded break-even performance.
What’s Next in the Telecom Space?
In addition to the remaining earnings releases and 5G deployments, all eyes will remain glued to how the administration attempts to safeguard the interests of domestic firms from Chinese threats.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2021.
Click here for the 6 trades >>