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U.S. telecom stocks witnessed a sharp uptrend toward the end of the past week after a relatively flat run for the most of it, buoyed by the approval of $1.2 trillion infrastructure bill by the Senate. The multi-billion infrastructure bill was passed by a majority vote of 69-30, with 19 Republicans joining the Democrats for a bipartisan support for the passage of the bill to the House of Representatives and then to the President’s desk for his signature to be deemed as law. The infusion of federal funds to improve broadband infrastructure for greater access and deeper penetration in the underserved markets is likely to bridge the digital divide with more focus on affordability and low-cost service option. This, in turn, spurred optimism and triggered an uptrend for the sector that has been battling fears of coronavirus resurgence with the spread of the Delta variant and speculations of protracted economic recovery owing to mounting inflationary pressures.
The infrastructure bill includes a $65 billion provision to significantly expand broadband access to Americans, as the administration aims to fortify its technological prowess to thwart the dominance of countries like China. It has earmarked about $14 billion or $30 monthly benefit to help low-income households pay for Internet. In addition, the bill provides about $42 billion in grants to states, which in turn will funnel it to carriers to expand their networks in rural areas that lack high-quality Internet service. However, in order to be entitled to receive the federal funds, the service providers will have to offer a low-cost service option and publish details about their products akin to nutrition labels. This is likely to recast broadband service as a necessary utility service similar to water and electricity that every Americans should have access to.
Although critics argue that the grants could stifle innovation in high-speed Internet technology and make it harder for new entrants to join the fray, the bill has received univocal support from virtually all telecom groups and is termed to be a major step in delivering “reliable, affordable, high-speed Internet to every household.” Additionally, the bill is widely expected to increase the number of households that opt for affordable Internet service, who could eventually become full-paying customers, benefiting the telecom industry in the long term.
Regarding company-specific news, quarterly earnings primarily took the center stage over the past five trading days.
Recap of the Week’s Most Important Stories
1. Motorola Solutions, Inc. (MSI - Free Report) reported strong second-quarter 2021 results, driven by diligent execution of operational plans and healthy growth dynamics backed by solid order trends. Adjusted earnings and revenues surpassed the respective Zacks Consensus Estimate and improved significantly year over year.
Excluding non-recurring items, non-GAAP earnings in the quarter were $2.07 per share compared with $1.39 in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by 15 cents. Quarterly net sales were record high at $1,971 million, up 21.8% year over year due to increased demand across the globe driven by strength of its business model and value of its mission-critical integrated ecosystem. The top line exceeded the consensus estimate of $1,942 million.
2. Cambium Networks Corporation (CMBM - Free Report) reported solid second-quarter 2021 results, wherein both the bottom and the top lines beat the respective Zacks Consensus Estimate. With record revenues and multiple growth drivers, this momentum is likely to continue for the company in 2021 and beyond.
Non-GAAP net income came in at $12.9 million or 45 cents per share compared with $4.3 million or 16 cents per share in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by 12 cents, delivering a surprise of 36.4%. Quarterly revenues were record high at $92.7 million compared with $62.3 million in the year-ago quarter. The growth was driven by solid demand for Point-to-Multi-Point, Point-to-Point and enterprise Wi-Fi solutions. The top line surpassed the consensus estimate of $88 million.
Net income in the June quarter was $35 million or 39 cents per share compared with $68 million or 78 cents per share in the prior-year quarter. The decline was primarily due to lower operating income and higher interest expense. The bottom line missed the Zacks Consensus Estimate by 4 cents. Quarterly total operating revenues increased 4.2% year over year to $1,014 million, which reflects growth in service revenues and equipment sales. The top line, however, marginally missed the consensus estimate of $1,015 million.
4. Bandwidth Inc. (BAND - Free Report) reported healthy second-quarter 2021 results, wherein both the bottom line and the top line surpassed their respective Zacks Consensus Estimate. New customer additions, robust cross-selling momentum, differentiated global platform and reinforced customer relationships favored the Raleigh, NC-based company’s quarterly performance.
Adjusted net income came in at $8.6 million or 32 cents per share compared with $3.1 million or 13 cents per share in the year-ago quarter. The bottom line also beat the Zacks Consensus Estimate by 23 cents, delivering a surprise of 255.6%. Quarterly total revenues were $120.7 million compared with $76.8 million in the prior-year quarter. The 57.1% growth was primarily driven by higher Communications Platform-as-a-Service (CPaaS) revenues. The top line surpassed the consensus estimate of $115 million.
5. AT&T Inc.’s (T - Free Report) senior executive vice president and chief financial officer, Pascal Desroches, provided an update to shareholders at the Oppenheimer Technology, Internet & Communications Conference.
Desroches stated that AT&T continues to execute in its core market areas of 5G, fiber and HBO Max. For 2021, the company expects gross capital investment to be about $22 billion including capital expenditures of $17 billion. In the wireless business, robust demand for mobile services coupled with AT&T’s go-to-market strategy will enable it to maintain postpaid subscriber growth in the second half of 2021.
Price Performance
The following table shows the price movement of some of the major telecom stocks over the past week and six months.
Image Source: Zacks Investment Research
In the past five trading days, Motorola has been the best performer with the stock gaining 1.9%, while Bandwidth declined the most with its stock falling 11.5%.
Over the past six months, Motorola has been the best performer with its stock appreciating 20.3%, while Bandwidth declined the most with its stock falling 61.2%.
Over the past six months, the Zacks Telecommunications Services industry has gained 13.1% and the S&P 500 has rallied 13.3%.
Image Source: Zacks Investment Research
What’s Next in the Telecom Space?
In addition to 5G deployments and product launches, all eyes will remain glued to how the administration continues to implement key policy changes to safeguard the interests of the industry.
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Telecom Stock Roundup: Motorola, Cambium Exceed Q2 Earnings Estimates & More
U.S. telecom stocks witnessed a sharp uptrend toward the end of the past week after a relatively flat run for the most of it, buoyed by the approval of $1.2 trillion infrastructure bill by the Senate. The multi-billion infrastructure bill was passed by a majority vote of 69-30, with 19 Republicans joining the Democrats for a bipartisan support for the passage of the bill to the House of Representatives and then to the President’s desk for his signature to be deemed as law. The infusion of federal funds to improve broadband infrastructure for greater access and deeper penetration in the underserved markets is likely to bridge the digital divide with more focus on affordability and low-cost service option. This, in turn, spurred optimism and triggered an uptrend for the sector that has been battling fears of coronavirus resurgence with the spread of the Delta variant and speculations of protracted economic recovery owing to mounting inflationary pressures.
The infrastructure bill includes a $65 billion provision to significantly expand broadband access to Americans, as the administration aims to fortify its technological prowess to thwart the dominance of countries like China. It has earmarked about $14 billion or $30 monthly benefit to help low-income households pay for Internet. In addition, the bill provides about $42 billion in grants to states, which in turn will funnel it to carriers to expand their networks in rural areas that lack high-quality Internet service. However, in order to be entitled to receive the federal funds, the service providers will have to offer a low-cost service option and publish details about their products akin to nutrition labels. This is likely to recast broadband service as a necessary utility service similar to water and electricity that every Americans should have access to.
Although critics argue that the grants could stifle innovation in high-speed Internet technology and make it harder for new entrants to join the fray, the bill has received univocal support from virtually all telecom groups and is termed to be a major step in delivering “reliable, affordable, high-speed Internet to every household.” Additionally, the bill is widely expected to increase the number of households that opt for affordable Internet service, who could eventually become full-paying customers, benefiting the telecom industry in the long term.
Regarding company-specific news, quarterly earnings primarily took the center stage over the past five trading days.
Recap of the Week’s Most Important Stories
1. Motorola Solutions, Inc. (MSI - Free Report) reported strong second-quarter 2021 results, driven by diligent execution of operational plans and healthy growth dynamics backed by solid order trends. Adjusted earnings and revenues surpassed the respective Zacks Consensus Estimate and improved significantly year over year.
Excluding non-recurring items, non-GAAP earnings in the quarter were $2.07 per share compared with $1.39 in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by 15 cents. Quarterly net sales were record high at $1,971 million, up 21.8% year over year due to increased demand across the globe driven by strength of its business model and value of its mission-critical integrated ecosystem. The top line exceeded the consensus estimate of $1,942 million.
2. Cambium Networks Corporation (CMBM - Free Report) reported solid second-quarter 2021 results, wherein both the bottom and the top lines beat the respective Zacks Consensus Estimate. With record revenues and multiple growth drivers, this momentum is likely to continue for the company in 2021 and beyond.
Non-GAAP net income came in at $12.9 million or 45 cents per share compared with $4.3 million or 16 cents per share in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by 12 cents, delivering a surprise of 36.4%. Quarterly revenues were record high at $92.7 million compared with $62.3 million in the year-ago quarter. The growth was driven by solid demand for Point-to-Multi-Point, Point-to-Point and enterprise Wi-Fi solutions. The top line surpassed the consensus estimate of $88 million.
3. United States Cellular Corporation (USM - Free Report) reported unimpressive second-quarter 2021 results, wherein both the bottom line and the top line missed the Zacks Consensus Estimate.
Net income in the June quarter was $35 million or 39 cents per share compared with $68 million or 78 cents per share in the prior-year quarter. The decline was primarily due to lower operating income and higher interest expense. The bottom line missed the Zacks Consensus Estimate by 4 cents. Quarterly total operating revenues increased 4.2% year over year to $1,014 million, which reflects growth in service revenues and equipment sales. The top line, however, marginally missed the consensus estimate of $1,015 million.
4. Bandwidth Inc. (BAND - Free Report) reported healthy second-quarter 2021 results, wherein both the bottom line and the top line surpassed their respective Zacks Consensus Estimate. New customer additions, robust cross-selling momentum, differentiated global platform and reinforced customer relationships favored the Raleigh, NC-based company’s quarterly performance.
Adjusted net income came in at $8.6 million or 32 cents per share compared with $3.1 million or 13 cents per share in the year-ago quarter. The bottom line also beat the Zacks Consensus Estimate by 23 cents, delivering a surprise of 255.6%. Quarterly total revenues were $120.7 million compared with $76.8 million in the prior-year quarter. The 57.1% growth was primarily driven by higher Communications Platform-as-a-Service (CPaaS) revenues. The top line surpassed the consensus estimate of $115 million.
5. AT&T Inc.’s (T - Free Report) senior executive vice president and chief financial officer, Pascal Desroches, provided an update to shareholders at the Oppenheimer Technology, Internet & Communications Conference.
Desroches stated that AT&T continues to execute in its core market areas of 5G, fiber and HBO Max. For 2021, the company expects gross capital investment to be about $22 billion including capital expenditures of $17 billion. In the wireless business, robust demand for mobile services coupled with AT&T’s go-to-market strategy will enable it to maintain postpaid subscriber growth in the second half of 2021.
Price Performance
The following table shows the price movement of some of the major telecom stocks over the past week and six months.
Image Source: Zacks Investment Research
In the past five trading days, Motorola has been the best performer with the stock gaining 1.9%, while Bandwidth declined the most with its stock falling 11.5%.
Over the past six months, Motorola has been the best performer with its stock appreciating 20.3%, while Bandwidth declined the most with its stock falling 61.2%.
Over the past six months, the Zacks Telecommunications Services industry has gained 13.1% and the S&P 500 has rallied 13.3%.
Image Source: Zacks Investment Research
What’s Next in the Telecom Space?
In addition to 5G deployments and product launches, all eyes will remain glued to how the administration continues to implement key policy changes to safeguard the interests of the industry.