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5 Telecom Stocks with Promise to Continue Bull Run in 2019
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The outgoing year was remarkably eventful for the global telecommunications ecosystem as companies underwent a radical transformation to adapt to new, appealing industry trends while gaining competitive edge. In particular, wireless carriers strived to improve their network coverage and offered better services to customers through network densification, using small cells, installing more fiber infrastructure and enhancing spectrum efficiency.
Factors That Aided Performance
Cable firms have benefited from the massive growth in broadband consumption due to greater penetration of smart devices. Factors such as advanced technology, intense market competition and high investments in wireless communication and satellite have largely fueled market growth.
Meanwhile, the first commercial deployments of 5G by leading players in key markets have been the center of attraction. Carriers are continuously working on 5G networks to create a wave of faster Internet.
Furthermore, reduction in corporate tax rate from 35% to 20% has mostly been accretive to cash flow and has resulted in a huge windfall for the capital-intensive telecom sector. The immediate expensing of investment in all tangible, intangible and real property has significantly benefited carriers, who have largely utilized this money for 5G network R&D and its deployment.
5 Potential Telecom Outperformers
As we step into 2019, telcos will likely aim to accelerate the transformative approach to support the digital and interconnected economy. This will be primarily driven by the current developments related to machine-to-machine, Big Data analytics, artificial intelligence, cloud computing and Internet of Things in the upcoming 5G era.
In order to capitalize on the solid industry prospects, we have cherry-picked some telecom stocks using the Zacks Stock Screener. Below are five stocks that have comfortably outperformed the S&P 500 over the past year and are likely to stay on their growth trajectory in 2019 due to their solid fundamentals.
Ubiquiti Networks, Inc. : Headquartered in New York, NY, this Zacks Rank #1 wireless equipment manufacturer has gained 48.9% in the past year. The company’s excellent global business model, which is highly flexible and adaptable to any kind of change in markets, helps it combat challenges and maximize growth.
Its business model is backed by a rapidly growing and highly engaged community of service providers, distributors, value-added resellers, and systems integrators. The Zacks Consensus Estimate for the next fiscal-year earnings has moved up 24.4% in the past year. Ubiquiti has a long-term earnings growth expectation of 14%.
Ciena Corporation (CIEN - Free Report) : This Hanover, MD-based optical networking equipment provider has gained a solid 56.6% in the past year. The company has strong growth prospects in the international markets with a lot of opportunities in Asia Pacific, especially India. Its revenues are expected to benefit from rising demand for packet-optical transport and switching products, integrated network and service management software.
The company is increasingly investing in the data and optical fiber market to serve surging bandwidth demand. Growing usage of service management software in the global communication market remains a key catalyst.
The Zacks Consensus Estimate for the next fiscal-year earnings has moved up a stellar 514.7% in the past year. Ciena has a long-term earnings growth expectation of 15.5%. The stock currently carries a Zacks Rank #2.
United States Cellular Corp. (USM - Free Report) : This Chicago, IL-based wireless service provider has gained 51.4% in the past year. The company is determined to offer the best wireless experience to customers by providing superior quality network and national coverage. It is focused on improving cost and profitability by managing data delivery cost and has introduced equipment installment plans.
It has successfully completed 4G LTE network rollout, providing an exceptional network experience to suburban and rural markets. The company remains bullish about the growing demand for smartphones, which enjoy significant market penetration, supporting growth in data revenues.
The Zacks Consensus Estimate for the next fiscal-year earnings has moved up an astounding 274.4% in the past year. The stock currently carries a Zacks Rank #2.
Sprint Corporation (S - Free Report) : Headquartered in Overland Park, KS, this Zacks Rank #2 wireless and wireline communications service provider has gained a modest 4.3% in the past year. The company’s strategy of balancing growth and profitability while increasing network investments and adding digital capabilities will likely drive its financial performance.
Its plan to improve cost structure and "Unlimited for All" offer for customers bode well. The Zacks Consensus Estimate for the next fiscal-year earnings has moved up a colossal 1811.1% in the past year. Sprint has a long-term earnings growth expectation of 19.6%.
Ericsson (ERIC - Free Report) : This Stockholm, Sweden-based communications technology solutions provider has gained 33.5% in the past year. The company is intensifying its cost-streamlining efforts with focus on structural changes to generate lasting efficiency gains. At the same time, the company is actively pursuing three key areas — core business expansion, targeted growth, and cost and efficiency — to fuel growth.
Ericsson is also investing significantly for commercial deployment of 5G across the globe. Artificial intelligence and automation remain key enablers for Ericsson’s future business development. Earnings for fiscal 2019 are likely to increase 47.3% year over year. The stock currently sports a Zacks Rank #1.
Looking Ahead
Alongside 5G deployments, carriers are increasingly focusing to tap the media space through M&A deals and strategic partnerships. Mobile content and video are some of the most significant consumer use cases for 5G, so expansion into this arena is a natural progression for carriers seeking growth.
We expect this to continue in 2019. Network upgrades remain the key trend around the world along with massive investments in fixed broadband based on fiber. Core focus will also be on how the industry adapts to the added set of tariffs (if any) — which could be a game changer for U.S. tech and telecom companies in the long run.
In addition to the stocks discussed above, would you like to know about our 10 top tickers to buy and hold for the entirety of 2019?
5 Telecom Stocks with Promise to Continue Bull Run in 2019
The outgoing year was remarkably eventful for the global telecommunications ecosystem as companies underwent a radical transformation to adapt to new, appealing industry trends while gaining competitive edge. In particular, wireless carriers strived to improve their network coverage and offered better services to customers through network densification, using small cells, installing more fiber infrastructure and enhancing spectrum efficiency.
Factors That Aided Performance
Cable firms have benefited from the massive growth in broadband consumption due to greater penetration of smart devices. Factors such as advanced technology, intense market competition and high investments in wireless communication and satellite have largely fueled market growth.
Meanwhile, the first commercial deployments of 5G by leading players in key markets have been the center of attraction. Carriers are continuously working on 5G networks to create a wave of faster Internet.
Furthermore, reduction in corporate tax rate from 35% to 20% has mostly been accretive to cash flow and has resulted in a huge windfall for the capital-intensive telecom sector. The immediate expensing of investment in all tangible, intangible and real property has significantly benefited carriers, who have largely utilized this money for 5G network R&D and its deployment.
5 Potential Telecom Outperformers
As we step into 2019, telcos will likely aim to accelerate the transformative approach to support the digital and interconnected economy. This will be primarily driven by the current developments related to machine-to-machine, Big Data analytics, artificial intelligence, cloud computing and Internet of Things in the upcoming 5G era.
In order to capitalize on the solid industry prospects, we have cherry-picked some telecom stocks using the Zacks Stock Screener. Below are five stocks that have comfortably outperformed the S&P 500 over the past year and are likely to stay on their growth trajectory in 2019 due to their solid fundamentals.
These either carry a Zacks Rank #1 (Strong Buy) or 2 (Buy) and seem to hold great promise for the near future. You can see the complete list of today’s Zacks #1 Rank stocks here.
Ubiquiti Networks, Inc. : Headquartered in New York, NY, this Zacks Rank #1 wireless equipment manufacturer has gained 48.9% in the past year. The company’s excellent global business model, which is highly flexible and adaptable to any kind of change in markets, helps it combat challenges and maximize growth.
Its business model is backed by a rapidly growing and highly engaged community of service providers, distributors, value-added resellers, and systems integrators. The Zacks Consensus Estimate for the next fiscal-year earnings has moved up 24.4% in the past year. Ubiquiti has a long-term earnings growth expectation of 14%.
Ciena Corporation (CIEN - Free Report) : This Hanover, MD-based optical networking equipment provider has gained a solid 56.6% in the past year. The company has strong growth prospects in the international markets with a lot of opportunities in Asia Pacific, especially India. Its revenues are expected to benefit from rising demand for packet-optical transport and switching products, integrated network and service management software.
The company is increasingly investing in the data and optical fiber market to serve surging bandwidth demand. Growing usage of service management software in the global communication market remains a key catalyst.
The Zacks Consensus Estimate for the next fiscal-year earnings has moved up a stellar 514.7% in the past year. Ciena has a long-term earnings growth expectation of 15.5%. The stock currently carries a Zacks Rank #2.
United States Cellular Corp. (USM - Free Report) : This Chicago, IL-based wireless service provider has gained 51.4% in the past year. The company is determined to offer the best wireless experience to customers by providing superior quality network and national coverage. It is focused on improving cost and profitability by managing data delivery cost and has introduced equipment installment plans.
It has successfully completed 4G LTE network rollout, providing an exceptional network experience to suburban and rural markets. The company remains bullish about the growing demand for smartphones, which enjoy significant market penetration, supporting growth in data revenues.
The Zacks Consensus Estimate for the next fiscal-year earnings has moved up an astounding 274.4% in the past year. The stock currently carries a Zacks Rank #2.
Sprint Corporation (S - Free Report) : Headquartered in Overland Park, KS, this Zacks Rank #2 wireless and wireline communications service provider has gained a modest 4.3% in the past year. The company’s strategy of balancing growth and profitability while increasing network investments and adding digital capabilities will likely drive its financial performance.
Its plan to improve cost structure and "Unlimited for All" offer for customers bode well. The Zacks Consensus Estimate for the next fiscal-year earnings has moved up a colossal 1811.1% in the past year. Sprint has a long-term earnings growth expectation of 19.6%.
Ericsson (ERIC - Free Report) : This Stockholm, Sweden-based communications technology solutions provider has gained 33.5% in the past year. The company is intensifying its cost-streamlining efforts with focus on structural changes to generate lasting efficiency gains. At the same time, the company is actively pursuing three key areas — core business expansion, targeted growth, and cost and efficiency — to fuel growth.
Ericsson is also investing significantly for commercial deployment of 5G across the globe. Artificial intelligence and automation remain key enablers for Ericsson’s future business development. Earnings for fiscal 2019 are likely to increase 47.3% year over year. The stock currently sports a Zacks Rank #1.
Looking Ahead
Alongside 5G deployments, carriers are increasingly focusing to tap the media space through M&A deals and strategic partnerships. Mobile content and video are some of the most significant consumer use cases for 5G, so expansion into this arena is a natural progression for carriers seeking growth.
We expect this to continue in 2019. Network upgrades remain the key trend around the world along with massive investments in fixed broadband based on fiber. Core focus will also be on how the industry adapts to the added set of tariffs (if any) — which could be a game changer for U.S. tech and telecom companies in the long run.
In addition to the stocks discussed above, would you like to know about our 10 top tickers to buy and hold for the entirety of 2019?
These 10 are painstakingly handpicked from over 4,000 companies covered by the Zacks Rank. They are our primary picks poised to outperform in the year ahead. Be among the first to see the new Zacks Top 10 Stocks >>