Telecom Stock Roundup: Verizon Beats On Q3 Earnings, AT&T's 3-Year View & More

In the past five trading days, telecom stocks witnessed a downtrend as fresh developments threatened to jeopardize the proposed “Phase One” deal between the United States and China. The partial trade accord was likely to ease the bilateral tensions created by the prolonged trade war. However, simmering tensions and political undercurrents raised speculations about a probable signing of an agreement in mid-November between President Trump and his Chinese counterpart. In addition, lower-than-expected earnings performance and relatively soft outlook from hitherto declared results have triggered uncertainty within the beleaguered sector.

The FCC has formulated draft proposals that intend to bar U.S. telecom firms from using funds from its Universal Services Fund to buy equipment from such companies that are deemed to be national security threats. The agency is also working out the finer details of a policy that would enable domestic firms to rip off equipment from Chinese telecom manufacturers like Huawei and ZTE (HK:0763) to eliminate the threat of data espionage. The FCC is scheduled to vote on the proposals on Nov 19, before they are forwarded to the President for formal approval.

The “economic bullying” at a critical juncture of the trade negotiation process has cast a shadow on the “Phase One” deal as China has raised objections to such unilateral move without any concrete evidence. Moreover, the sudden cancellation of the Asia-Pacific Economic Cooperation summit in Chile due to the political turmoil within the country has created a new obstacle for the Sino-U.S. relations. The White House is reportedly seeking some alternate venues for signing the initial trade agreement, although no official location has yet been confirmed. The U.S. government is also considering extending the tariff exemptions on $34 billion worth of Chinese imports that are slated expire at the end of this year.

Although both sides remain intent to reach a consensus deal at the earliest on domestic compulsions, it appears that the trade war has been rather a ‘two-steps forward, three-steps backward’ affair. This, in turn, has largely dragged the sector down despite the fact that the S&P is hovering around record-high territories backed by broad-based expectations of a trade settlement and the Fed’s interest rate cut.

Regarding company-specific news, quarterly earnings primarily took the center stage over the past five trading days.

Recap of the Week’s Most Important Stories

1. Verizon Communications Inc. (NYSE:VZ) reported solid third-quarter 2019 results, primarily led by the wireless business. With industry-leading wireless products and services, the company remains well poised to benefit from increased 5G deployment across the country under the new operational framework.

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Excluding non-recurring items, adjusted earnings were $1.25 per share compared with $1.22 in the year-earlier quarter and beat the Zacks Consensus Estimate by a penny. Consolidated GAAP operating revenues improved 0.9% year over year to $32,894 million as wireless service revenue growth was partially offset by lower wireless equipment and decline in legacy wireline revenues. The top line beat the Zacks Consensus Estimate of $32,715 million. (Read more: Zacks Investment Research

Written By: Zacks Investment Research