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The U.S. telecom stocks witnessed a relatively soft uptrend over the past week after an initial hiccup backed by the optimism about the Biden administration’s focused roadmap for growth and technology leadership. Allaying circumspection regarding the transitionary phase, the White House offered key insights into its broad telecommunications policy as it vouched to safeguard domestic networks from cyber espionage and potential threats from “untrusted vendors” that threaten national security. A better-than-expected quarterly performance from hitherto reported companies proved to be an additional catalyst for the telecom sector.
Early comments by the members of the Biden administration made it clear that federal laws will work in unison with other agencies to eliminate threats from China-based telecommunication firms like Huawei and ZTE, while encouraging trusted vendors to expand their production base. With water-tight legislations and sound policy guidelines, the government is expected to safeguard the interests of domestic telecommunications firms and maintain a tight leash on China-based entities to thwart national security risks.
Meanwhile, a bipartisan group of lawmakers has reintroduced the Telecommunications Skilled Workforce Act that aims to coordinate federal efforts for telecom workforce development, including apprenticeships while focusing on the specific needs of rural areas. The bill seeks to establish an interagency working group headed by the Federal Communications Commission and ably supported by the Department of Labor and other stakeholders. The agency will offer recommendations based on the telecom industry’s workforce needs and will aim to bridge the divide between existing employee skillsets and the requisite training necessary for addressing the full-scale 5G deployment. It will also issue guidance to states to ease workforce shortages to build and maintain broadband and 5G networks, even in rural areas.
Regarding company-specific news, quarterly results primarily took the center stage over the past five trading days.
Net income in the December quarter was SEK 7,522 million ($873.4 million) or SEK 2.26 (27 cents) per share compared with SEK 4,430 million or SEK 1.33 per share in the prior-year quarter. The improvement was driven by higher operating income. The bottom line beat the Zacks Consensus Estimate by 6 cents. Quarterly net sales increased 4.8% year over year to SEK 69,590 million ($8,080 million), primarily driven by 5G deployments in North-East Asia, North America and Europe. The top line surpassed the consensus estimate of $7,418 million.
2. Juniper Networks, Inc. (JNPR - Free Report) reported decent fourth-quarter 2020 results wherein both the top and bottom lines surpassed the Zacks Consensus Estimate. Driven by higher revenues, the Sunnyvale, CA-based network products and services provider witnessed robust demand for Routing products during the quarter followed by strength across Enterprise vertical.
Quarterly non-GAAP net income was $181.8 million or 55 cents per share (above the mid-point of the company’s guidance) compared with $198.7 million or 58 cents per share in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by a penny. Quarterly total revenues aggregated $1,222.6 million (above the mid-point of the management-provided guidance) compared with $1,208.1 million reported in the year-ago quarter. The year-over-year growth, despite coronavirus-led adversities leading to supply constraints and extended lead times, was largely driven by healthy momentum across all verticals. The top line beat the consensus mark of $1,194 million.
3. Qualcomm Incorporated (QCOM - Free Report) reported solid first-quarter fiscal 2021 results with record earnings, primarily driven by the ramp-up in 5G-enabled chips. Both the top and bottom-line figures increased year over year, 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 $2,510 million or $2.17 per share compared with $1,151 million or 99 cents in the year-ago quarter. Undeterred by the adverse impact of the virus outbreak, record high non-GAAP earnings per share were largely driven by higher revenues across the board. The bottom line exceeded management’s guidance and beat the Zacks Consensus Estimate by 7 cents. Non-GAAP revenues in the reported quarter were $8,226 million compared with $5,057 million in the year-earlier quarter. The figure missed the consensus mark of $8,316 million.
Quarterly non-GAAP net income was $40 million or 99 cents per share compared with $10.4 million or 34 cents per share in the prior-year quarter. The bottom line beat the Zacks Consensus Estimate by 13 cents, delivering a surprise of 15.1%. NETGEAR generated revenues of $367.1 million, up 45.1% year over year. The performance was primarily driven by strong demand for its Wi-Fi 6 offerings, which drove exceptional growth in the connected home products business. The top line surpassed the consensus estimate of $348 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 gaining 5.3%, while Lumen was the biggest decliner with its stock falling 30.5%.
Over the past six months, Qualcomm has been the best performer with its stock appreciating 31.4%, while Juniper was the biggest decliner with its stock falling 5.3%.
Over the past six months, the Zacks Telecommunications Services industry declined 1.3% on average while the S&P 500 has gained 16.7%.
What’s Next in the Telecom Space?
In addition to the 5G deployments and product launches, all eyes will remain glued to how the earnings season unfurls for the remaining companies within the sector.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
Image: Bigstock
Telecom Stock Roundup: Ericsson, Juniper Surpass Q4 Earnings Estimates & More
The U.S. telecom stocks witnessed a relatively soft uptrend over the past week after an initial hiccup backed by the optimism about the Biden administration’s focused roadmap for growth and technology leadership. Allaying circumspection regarding the transitionary phase, the White House offered key insights into its broad telecommunications policy as it vouched to safeguard domestic networks from cyber espionage and potential threats from “untrusted vendors” that threaten national security. A better-than-expected quarterly performance from hitherto reported companies proved to be an additional catalyst for the telecom sector.
Early comments by the members of the Biden administration made it clear that federal laws will work in unison with other agencies to eliminate threats from China-based telecommunication firms like Huawei and ZTE, while encouraging trusted vendors to expand their production base. With water-tight legislations and sound policy guidelines, the government is expected to safeguard the interests of domestic telecommunications firms and maintain a tight leash on China-based entities to thwart national security risks.
Meanwhile, a bipartisan group of lawmakers has reintroduced the Telecommunications Skilled Workforce Act that aims to coordinate federal efforts for telecom workforce development, including apprenticeships while focusing on the specific needs of rural areas. The bill seeks to establish an interagency working group headed by the Federal Communications Commission and ably supported by the Department of Labor and other stakeholders. The agency will offer recommendations based on the telecom industry’s workforce needs and will aim to bridge the divide between existing employee skillsets and the requisite training necessary for addressing the full-scale 5G deployment. It will also issue guidance to states to ease workforce shortages to build and maintain broadband and 5G networks, even in rural areas.
Regarding company-specific news, quarterly results primarily took the center stage over the past five trading days.
Recap of the Week’s Most Important Stories
1. Ericsson (ERIC - Free Report) reported solid fourth-quarter 2020 results, wherein the top and the bottom lines beat the respective Zacks Consensus Estimate.
Net income in the December quarter was SEK 7,522 million ($873.4 million) or SEK 2.26 (27 cents) per share compared with SEK 4,430 million or SEK 1.33 per share in the prior-year quarter. The improvement was driven by higher operating income. The bottom line beat the Zacks Consensus Estimate by 6 cents. Quarterly net sales increased 4.8% year over year to SEK 69,590 million ($8,080 million), primarily driven by 5G deployments in North-East Asia, North America and Europe. The top line surpassed the consensus estimate of $7,418 million.
2. Juniper Networks, Inc. (JNPR - Free Report) reported decent fourth-quarter 2020 results wherein both the top and bottom lines surpassed the Zacks Consensus Estimate. Driven by higher revenues, the Sunnyvale, CA-based network products and services provider witnessed robust demand for Routing products during the quarter followed by strength across Enterprise vertical.
Quarterly non-GAAP net income was $181.8 million or 55 cents per share (above the mid-point of the company’s guidance) compared with $198.7 million or 58 cents per share in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by a penny. Quarterly total revenues aggregated $1,222.6 million (above the mid-point of the management-provided guidance) compared with $1,208.1 million reported in the year-ago quarter. The year-over-year growth, despite coronavirus-led adversities leading to supply constraints and extended lead times, was largely driven by healthy momentum across all verticals. The top line beat the consensus mark of $1,194 million.
3. Qualcomm Incorporated (QCOM - Free Report) reported solid first-quarter fiscal 2021 results with record earnings, primarily driven by the ramp-up in 5G-enabled chips. Both the top and bottom-line figures increased year over year, 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 $2,510 million or $2.17 per share compared with $1,151 million or 99 cents in the year-ago quarter. Undeterred by the adverse impact of the virus outbreak, record high non-GAAP earnings per share were largely driven by higher revenues across the board. The bottom line exceeded management’s guidance and beat the Zacks Consensus Estimate by 7 cents. Non-GAAP revenues in the reported quarter were $8,226 million compared with $5,057 million in the year-earlier quarter. The figure missed the consensus mark of $8,316 million.
4. NETGEAR, Inc. (NTGR - Free Report) reported solid fourth-quarter 2020 results, wherein the top and the bottom lines beat the respective Zacks Consensus Estimate.
Quarterly non-GAAP net income was $40 million or 99 cents per share compared with $10.4 million or 34 cents per share in the prior-year quarter. The bottom line beat the Zacks Consensus Estimate by 13 cents, delivering a surprise of 15.1%. NETGEAR generated revenues of $367.1 million, up 45.1% year over year. The performance was primarily driven by strong demand for its Wi-Fi 6 offerings, which drove exceptional growth in the connected home products business. The top line surpassed the consensus estimate of $348 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 gaining 5.3%, while Lumen was the biggest decliner with its stock falling 30.5%.
Over the past six months, Qualcomm has been the best performer with its stock appreciating 31.4%, while Juniper was the biggest decliner with its stock falling 5.3%.
Over the past six months, the Zacks Telecommunications Services industry declined 1.3% on average while the S&P 500 has gained 16.7%.
What’s Next in the Telecom Space?
In addition to the 5G deployments and product launches, all eyes will remain glued to how the earnings season unfurls for the remaining companies within the sector.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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