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MARKETS LIVE BLOG:

STOCK FUTURES SLIDE AFTER META'S REALITY CHECK, WITH GDP ON DECK

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Telecom Stock Roundup: Solid Q4 at CMCSA, CCI, ROG; Mixed Bag for Sprint

Zacks Equity Research
Updated

The past week witnessed several key developments in the telecom industry. On the earnings front, U.S. cable MSO (multi service operator) and media behemoths Comcast Corp. CMCSA, leading wireless tower operator Crown Castle International Corp. CCI and Canada’s largest integrated telecom operator Rogers Communications Inc. RCI reported strong financial results for the fourth quarter of 2016 wherein both the top and the bottom line surpassed the Zacks Consensus Estimate.

Comcast added a net of 385,000 high-speed Internet customers, 80,000 video customers and 44,000 voice customers in the reported quarter. Rogers Communications added a net of 286,000 postpaid wireless subscribers, 97,000 high-speed Internet customers and 4,000 telephony subscribers. However, the company lost 76,000 video subscribers in the reported quarter.

Meanwhile, U.S. national telecom operator Sprint Corp. S reported mixed financial results for the third quarter of fiscal 2016 (ended Dec 31, 2016). The company’s bottom line missed the Zacks Consensus Estimate by a wide margin while revenues beat the mark.In the reported quarter, Sprint added 577,000 total wireless connections, including postpaid net additions of 405,000, prepaid net losses of 501,000, and wholesale and affiliate net additions of 673,000. Sprint currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In addition, Sprint announced plans to drop the price of its unlimited data, talk and text plan from $60 to $50, say for a limited period of time, as a promotional offer. The company will continue to offer the second line for $40 per month and additional lines for $30 each.Further, customers signing up for the new Sprint $50 price can avail it till the end of Mar 2018, after which the monthly charge will scale back to $60 a month.

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Taiwan’s largest integrated telecom operator Chunghwa Telecom Co. Ltd. CHT announced disappointing financial results in the fourth quarter of 2016. Quarterly total revenue was approximately $1,834 million, down 3.7% year over year. Fourth-quarter net income came in at around $243 million, down 12.3% year over year.  Net earnings per American Depositary Share were 31 cents, down 16.2% year over year.

Apart from earnings announcements, two major developments took place in the telecom space last week. Per a recent report by The Wall Street Journal, Verizon Communications Inc. VZ, the largest telecom operator in the U.S. is exploring strategic options to acquire Charter Communications Inc. CHTR, the second largest cable MSO in the nation.

Although The Wall Street Journal stated there is no guarantee that the deal will materialize, a combination of two of the industry's biggest companies may be the latest one in the ongoing consolidation trend in the telecom-pay-TV-media space.

According to a recent report by The Business Journals, DISH Network Corp. DISH, the second largest satellite TV operator in the U.S., entered into an agreement with its sister concern, EchoStar Corp. SATS. Per the deal, DISH Network will obtain EchoStar assets and operations including the EchoStar Technologies hardware and software technology development group, set-top box development and satellite uplink and fiber-optic backhaul for its transmissions, along with some real estate owned by EchoStar in Colorado, Arizona and Wyoming.

This transaction will also transfer the 10% stake held by EchoStar in Sling TV and wireless spectrum licenses covering four markets in the 28 GHz band to DISH Network. On the other hand, EchoStar will obtain DISH Network’s 80% economic interest in Hughes Retail Group, which is the consumer satellite broadband services operation of EchoStar.

Read the last Telecom Stock Roundup for Jan 26, 2017.

Recap of the Week’s Most Important Stories

1.    GAAP net income of Comcast in the fourth quarter of 2016 came in at $2,296 million or 95 cents per share compared with $1,971 million or 79 cents in the prior-year quarter. However, quarterly adjusted earnings per share of 89 cents surpassed the Zacks Consensus Estimate of 87 cents. Quarterly total revenue was $21,025 million, up 9.2% year over year and ahead of the Zacks Consensus Estimate of $20,616 million. (read more: Comcast Tops Q4 Earnings and Revenue Estimates)

2.    Quarterly net income of Rogers Communications was approximately $286.1 million compared with $247.88 million in the year-ago quarter. Adjusted earnings per share of 55 cents beat the Zacks Consensus Estimate of 52 cents.Quarterly total revenue came in at around $2,628.6 million, up 1.67% year over year and above the Zacks Consensus Estimate of $2,619 million. (read more:  Rogers Communications Q4 Earnings & Revenues Top)

3.    Crown Castle International reported fourth-quarter 2016 earnings per share of $1.15, beating the Zacks Consensus Estimate of $1.11. However, GAAP net income fell 11.6% year over year to $124.7 million. Total revenue in the reported quarter increased 9.15% year over year to $1,032 million, beating the Zacks Consensus Estimate of $988 million. (read more: Qualcomm Q1 Earnings In Line, Revenues Fall Short)

4.    Quarterly net loss of Sprint was $479 million, or 12 cents per share compared with net loss of $836 million, or 21 cents, in the year-ago period, reflecting an improvement of $357 million, or 9 cents. Also, fiscal third-quarter adjusted net loss per share was wider than the Zacks Consensus Estimate of a loss of 8 cents. Total revenue came in at $8,549 million, up 5.45% year over year and ahead of the Zacks Consensus Estimate of $8,262 million. (read more:  Sprint Q3 Loss Wider than Expected, FY16 View Raised)

5.    The proposed combination of Verizon and Charter Communications will bring together Verizon’s 114.243 million wireless subscribers, 4.694 million FiOS video subscribers and 5.653 million FiOS Internet subscribers with Charter Communications’ 17 million video customers and 21 million high-speed Internet customers. Last year, Charter Communications became a formidable cable MSO after its acquisition of Time Warner Cable and BrightHouse LLC. (read more: Is Verizon Mulling to Acquire Charter Communications?)

Price Performance

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

Company

Last Week

Last 6 Months

VZ

-3.10%

-10.39%

T

0.36%

-2.55%

S

-2.17%

51.17%

TMUS

0.25%

35.14%

VOD

1.06%

-21.72%

CHL

0.64%

-8.56%

AMX

-0.32%

9.02%

CMCSA

2.49%

13.02%

DISH

2.05%

24.29%

Over the last five trading sessions, share price movement of most of the major telecom stocks was positive. Nevertheless, Verizon (3.10%) lost substantially over the same time frame. However, over the last six months, the price performance of most telecom stocks was mixed. Among the stocks that gained significantly are Sprint (57.17%), T-Mobile US (35.14%), DISH Network (24.29%) and Comcast (13.02%). On the other hand, Vodafone and Verizon lost 21.72% and 10.39%, respectively, in the same time period.

What’s Next in the Telecom Space?

We expect significant activities to continue in the telecom sector over the next week as big names like BCE Inc., America Movil, CenturyLink, TELUS, Vodafone, Infinera and Level 3 Communications are slated to release their fourth-quarter 2016 results.

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You are welcome to download the full, up-to-the-minute list of 220 Zacks Rank #1 "Strong Buy" stocks free of charge. There is no better place to start your own stock search. Plus you can access the full list of must-avoid Zacks Rank #5 "Strong Sells" and other private research. See the stocks free >>


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Crown Castle International Corporation (CCI): Free Stock Analysis Report
 
Sprint Corporation (S): Free Stock Analysis Report
 
Chunghwa Telecom Co., Ltd. (CHT): Free Stock Analysis Report
 
Verizon Communications Inc. (VZ): Free Stock Analysis Report
 
EchoStar Corporation (SATS): Free Stock Analysis Report
 
DISH Network Corporation (DISH): Free Stock Analysis Report
 
Rogers Communication, Inc. (RCI): Free Stock Analysis Report
 
Comcast Corporation (CMCSA): Free Stock Analysis Report
 
Charter Communications, Inc. (CHTR): Free Stock Analysis Report
 
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Zacks Investment Research