Telecom Stock Roundup: Ericsson Q2 Earnings Miss, AT&T's IBM Deal & More
Zacks Investment Research | Jul 17, 2019 09:38PM ET
In the past five trading days, telecom stocks witnessed a gradual uptrend after an initial slump on the anticipation of a breakthrough in the elusive trade deal between the United States and China. However, the sluggish pace of negotiation has created an element of uncertainty, which was a dampener for the stocks toward the end of the past week.
Despite ‘constructive’ initial level talks by top-ranked officials, no further details about the venue and the nature of the next level of communication have still been made available. Moreover, it remains uncertain whether the two sides would resume their dialogue from the draft text agreed upon before the pull back or use a different starting point for the proceedings. Nevertheless, a thaw in the Sino-U.S. relationship has buoyed the industry that has borne the brunt of the tariff war and has restored some exchange of goods with one of the most important markets for telecom parts and components.
Further, a bipartisan group of U.S. senators has introduced a bill to prevent any effort by President Trump and his Chinese counterpart to use Huawei as a bargaining chip in the larger trade negotiation landscape. Dubbed the Defending America’s 5G Future Act, the proposed bill aims to restrict Trump from awarding any further concession or relieving its inclusion in the Entity List without the approval of the Congress. The bill seeks to empower Congress to disallow waivers granted to U.S. companies doing business with such companies that are deemed to be potential national security threats.
A Republican lawmaker introduced another bill to press the administration to boost the presence of U.S. firms in international telecom organizations to curb China’s rising dominance in 5G. The bill urges the government to take necessary steps to improve “representation and leadership” of the country in such forums that set the standards for 5G network. This, in turn, is likely to thwart any attempts by China to gain prominence in the global 5G market and ensure that U.S. vendors do not lose out on competition and are not deprived of “better and cheaper” supply chains.
Regarding company-specific news, quarterly earnings, strategic collaborations, acquisitions and trial runs primarily took the center stage over the past five trading days.
Recap of the Week’s Most Important Stories
1. Ericsson (BS:ERICAs) (NASDAQ:ERIC) reported mixed second-quarter 2019 financial results, wherein the top line beat the Zacks Consensus Estimate but the bottom line missed the same.
Non-IFRS earnings came in at SEK 0.59 (6 cents) per share against loss of SEK 0.09 in the year-ago quarter. The bottom line missed the Zacks Consensus Estimate by a penny. Quarterly net sales increased 10% year over year to SEK 54,810 million ($5,800.6 million), primarily driven by growth in Networks in North America and North East Asia. The top line surpassed the consensus estimate of $5,721 million. (Read more: Zacks Investment Research
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