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Telecom Stock Roundup: ADTRAN's & Ericsson's Q2 Earnings & More

In the last five trading days, telecom stocks’ initial uptrend was replaced by a sharp fall, followed by a relatively flat trajectory and an eventual decline. The volatile trend was the likely result of the continuing trade war with China.

The Trump administration has reportedly drawn up a list of goods for imposing tariffs on an additional $200 billion worth of products imported from China. Although the earlier lists mostly spared telecom products, the latest round of tariffs is likely to impact network routers and components that go into digital signal processing, TVs, monitors and telecom gear.

As the United States aims to gain an upper hand against China in the trade war, it is quietly shoring its high frequency spectrum for the nationwide rollout of 5G services later this year. Federal Communications Commission chairman Ajit Pai revealed that it is likely to auction off spectrum in the 37GHz, 39GHz and 47GHz bands in the second half of 2019 to strengthen the country’s bid for leadership in the 5G race.

Amid this cacophony, the U.S. Commerce Department officially lifted its ban on ZTE as it deposited $400 million in the escrow account. This enabled China’s second biggest telecommunications equipment manufacturer to resume its normal business activities. However, the beleaguered firm will continue to remain under close scrutiny and its actions are likely to be monitored to ensure compliance with all U.S. laws and regulations.     
   
Regarding company-specific news, technology collaborations, new investments for network expansion and quarterly earnings ruled the roost over the last five trading days.

Recap of the Week’s Most Important Stories

1.    Verizon Communications Inc. VZ continues to deploy the latest 4G LTE advanced technologies to deliver faster peak data speeds and capacity for customers, driven by customer-focused planning, disciplined engineering and constant strategic investment.

The carrier aggregation integrates discreet bands of spectrum to ensure data flows between the bands more efficiently. (Read more: Verizon Deploys LTE Advanced Network for More Data Capacity)

2.    CenturyLink, Inc. CTL has announced that it will offer private access to Oracle Cloud with Oracle Cloud Infrastructure FastConnect to provide customers with a network experience that matches their cloud experience.

CenturyLink Cloud Connect Solutions provide private connectivity to recognized cloud service providers. It provides businesses with a network as flexible and agile as the cloud, seamlessly linking cloud environments over private and secure connections. (Read more: CenturyLink to Widen Cloud Offerings With Oracle FastConnect)

3.    Corning Incorporated GLW announced that it will invest in an existing production facility in the Hefei Xinzhan Hi-Tech Industrial Development Zone in the Anhui Province, China to augment its Automotive Glass Solutions business, with support from the local government.

The investment is likely to deliver the capability, quality and capacity required to drive innovation and offer drivers with the desired connectivity and user experience. The company expects this retrofitted facility to be fully operational by 2019. It will manufacture Corning Gorilla Glass for Automotive Interiors and will help to bring on new capacity quickly and efficiently for the growth of its automotive glass solutions business. (Read more: Corning to Invest More in Production Unit in China's Hefei)

4.    ADTRAN Inc. ADTN reported soft results in second-quarter 2018 with both the top line and bottom line deteriorating year over year. However, the metrics improved sequentially with solid performance from the international businesses.

Non-GAAP loss for the reported quarter was 10 cents per share against earnings of 30 cents in the year-earlier quarter. The figure was narrower than the Zacks Consensus Estimate of a loss of 23 cents. The significant year-over-year decline was primarily due to lower revenues. (Read more: ADTRAN Q2 Loss Narrower Than Expected, Revenues Match)

5.    In second-quarter 2018 results, Ericsson ERIC reported a non-IFRS loss of SEK 0.09 (1 cent) per share (excluding amortizations, write-downs of acquired intangible assets and restructuring charges) against income of SEK 0.33 per share in the year-ago quarter. The figure missed the Zacks Consensus Estimate of earnings of 2 cents.

Ericsson’s net sales for the quarter fell 1% year over year to SEK 49.8 billion ($5.7 billion). This was primarily due to decline in legacy product sales and lower telecom core sales in North East Asia. The top line, however, beat the Zacks Consensus Estimate of $5,432 million. (Read more: Ericsson Q2 Earnings Miss Estimates, Revenues Beat)

Price Performance

The following table shows the price movement of some of the major telecom stocks over the past week and during the last six months.



In the last five trading days, Harris Corporation HRS was the major gainer with its share price increasing 4.9%. SBA Communications Corporation SBAC was the major decliner with its stock losing 1.4%.

Over the last six months, Motorola Solutions, Inc. MSI was the best performer with its stock appreciating 21% while AT&T Inc. T declined the most with its shares falling 19.4%.

Over the last six months, the Zacks Telecommunications Services industry has underperformed the benchmark S&P 500 Index with an average fall of 11.3% compared with a decline of 0.3% for the latter.



What’s Next in the Telecom Space?

In addition to continued product launches and deployment of 5G technologies, all eyes will remain glued to the earnings releases of sector heavyweights like Verizon and AT&T.

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ADTRAN, Inc. (ADTN) : Free Stock Analysis Report
 
Ericsson (ERIC) : Free Stock Analysis Report
 
SBA Communications Corporation (SBAC) : Free Stock Analysis Report
 
Harris Corporation (HRS) : Free Stock Analysis Report
 
Motorola Solutions, Inc. (MSI) : Free Stock Analysis Report
 
AT&T Inc. (T) : Free Stock Analysis Report
 
Verizon Communications Inc. (VZ) : Free Stock Analysis Report
 
Corning Incorporated (GLW) : Free Stock Analysis Report
 
CenturyLink, Inc. (CTL) : Free Stock Analysis Report
 
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