Telecom Stock Roundup: Verizon, Qualcomm Trump Earnings Estimates & More

In the past five trading days, telecom stocks witnessed a steady descent followed by a slight uptrend as deteriorating trade relations between the United States and China shook the domestic and international markets. With both the countries appearing resolute to not open up to any negotiation at the moment, trade uncertainty played spoilsport and dragged the industry down. However, a stable quarterly performance on average lent stability toward the end of the past week as the industry aimed to shake off trade impediments.

With bilateral trade negotiations moving at a sluggish pace and failing to yield any concrete result, President Trump announced his intentions to impose a fresh round of 10% tariff on $300 billion worth of imports from China from September in addition to the existing set of tariffs. The decision to put the entire import basket from China under the tariff regime was also fueled by the fact that it reportedly backtracked on its promise to buy more U.S. agricultural products. The move derailed the trade talks and the markets went on a free fall. In retaliation, the communist nation allowed the Chinese yuan to drop below 7 per U.S. dollar – the lowest valuation for the currency in 11 years. This negated the impact of the proposed tariff and forced the Trump administration to label China as a ‘currency manipulator’. An escalation in the existing tariff rate is also on the anvil as the U.S. President vouched to up the ante to seek more leverage.

Further, the administration unveiled rules that formally ban Chinese telecom equipment manufacturer Huawei and four other firms from any government contracts. The rules prohibit any U.S. federal agency from purchasing telecom or technology equipment from the firms, except waivers under certain circumstances. This is likely to affect the supply chain of various U.S. telecom firms that depend on the Chinese market to a large extent. In addition, the average American household is expected to bear the brunt of the additional taxes as the tariffs are likely to lead to $1,000 increase in prices. This, in turn, is likely to dent demand and result in higher inventory levels.

In another development, the U.S. Federal Communications Commission’s streamlined licensing rules for small satellites passed the voting process for faster implementation in the near future. The rules would allow companies to secure spectrum rights much faster and cheaper by paying only $30,000 instead of nearly $500,000 mandated under existing norms. The new licensing would encourage operators to set up satellites that weigh 180 kilograms or less and operate below 600 kilometers, benefiting the industry as a whole.

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

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Recap of the Week’s Most Important Stories

1. Verizon Communications Inc. (NYSE:VZ) reported relatively healthy second-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.

Excluding non-recurring items, adjusted earnings were $1.23 per share compared with $1.20 in the year-earlier quarter and beat the Zacks Consensus Estimate by 3 cents. Consolidated GAAP revenues declined 0.4% year over year to $32,071 million as wireless service revenue growth was offset by lower wireless equipment and wireline service revenues. The top line missed the Zacks Consensus Estimate of $32,395 million. (Read more: Zacks Investment Research

Written By: Zacks Investment Research