Telecom ETFs In Focus Post Q3 Results

U.S. national security, economy and global standing are expected to benefit immensely from technological developments to be brought in by the 5G world, and M&A strategies remain the chosen way for going forward in the telecom space, per a recent survey of 82 U.S. telecommunications’ CEOs. However, a rising rate scenario is hurting this capital-intensive sector alongside trade war concerns.

Against this backdrop, here we discuss the latest earnings releases of the two top wireless service providers, Verizon (VZ - Free Report) and AT&T (T - Free Report), which reported Q3 results on Oct 23 and Oct 24, respectively. Verizon’s earnings were in line with the Zacks Consensus Estimate and AT&T missed the same. Revenue estimates were topped by both.

Verizon

Verizon recorded strong top-line growth led by solid service revenues and remains on track to benefit from the 5G era. The bottom line benefited from significant savings from the tax reform.

Adjusted earnings came in at $1.22 per share in Q3 compared with 98 cents in the year-earlier quarter and surpassed the Zacks Consensus Estimate of $1.19. Revenues came in at $32.61 billion, beating the Zacks Consensus Estimate of $32.54 billion and increasing 2.8% year over year. Verizon has a Zacks ETF Rank #3 (Hold) and a VGM Score of B.

For full-year 2018, Verizon reiterated its earlier guidance of both GAAP revenue and adjusted earnings per share increase by low single-digit percentage rates driven by expected savings from the tax reform and higher cash flow from operations.

AT&T

AT&T experienced solid wireless performance for the third quarter including postpaid phone gains, strong prepaid phone growth and accretive WarnerMedia contribution. However, reported earnings of 90 cents per share missed the Zacks Consensus Estimate of 93 cents. Earnings improved 21.6% year over year. Revenues came in at $45.74 billion, beating the Zacks Consensus Estimate of $45.63 billion and increasing 15.3% year over year. It has a Zacks ETF Rank #3 with a VGM Score of B.

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