The end of an earnings season can be a great time to discover new stocks and assess how companies are handling the current business environment. Let’s take a look at how Lumen (NYSE: LUMN) and the rest of the terrestrial telecommunication services stocks fared in Q1.
Terrestrial telecommunication companies face an uphill battle, as they mostly sell into a deflationary market, where the price of moving a bit tends to decrease over time with better technology. Without dependable volume growth, revenue growth could be challenged. Unfortunately, broadband penetration in their core US market is quite high already. On the other hand, data consumption from streaming entertainment and 5G expansion could provide a floor on growth for the next number of years. As if that wasn't enough to worry about, competition is intense, with larger telecom providers and hyperscalers expanding their own networks.
The 4 terrestrial telecommunication services stocks we track reported a slower Q1. As a group, revenues missed analysts’ consensus estimates by 1.1%.
While some terrestrial telecommunication services stocks have fared somewhat better than others, they have collectively declined. On average, share prices are down 2.9% since the latest earnings results.
Best Q1: Lumen (NYSE: LUMN)
With approximately 350,000 route miles of fiber optic cable spanning North America and the Asia Pacific, Lumen Technologies (NYSE: LUMN) operates a vast fiber optic network that provides communications, cloud connectivity, security, and IT solutions to businesses and consumers.
Lumen reported revenues of $3.18 billion, down 3.3% year on year. This print exceeded analysts’ expectations by 1.9%. Overall, it was an exceptional quarter for the company with a solid beat of analysts’ EPS estimates.
"The team's focus on operational excellence delivered better than expected financial results this quarter," said Kate Johnson, president and CEO of Lumen.
Lumen scored the biggest analyst estimates beat and fastest revenue growth of the whole group. Unsurprisingly, the stock is up 12.5% since reporting and currently trades at $3.96.
Is now the time to buy Lumen? Access our full analysis of the earnings results here, it’s free.
Cogent (NASDAQ: CCOI)
Operating a massive network spanning 20,000 miles of fiber optic cable and connecting to over 3,200 buildings worldwide, Cogent Communications (NASDAQ: CCOI) provides high-speed Internet access, private network services, and data center colocation to businesses and bandwidth-intensive organizations across 54 countries.
Cogent reported revenues of $247 million, down 7.2% year on year, falling short of analysts’ expectations by 1%. The business performed better than its peers, but it was unfortunately a slower quarter, leaving some shareholders hoping for more.
Although it had a fine quarter compared its peers, the market seems unhappy with the results as the stock is down 5.2% since reporting. It currently trades at $50.39.
Is now the time to buy Cogent? Access our full analysis of the earnings results here, it’s free.
Weakest Q1: U.S. Cellular (NYSE: USM)
Operating as a majority-owned subsidiary of Telephone and Data Systems since its founding in 1983, US Cellular (NYSE: USM) is a regional wireless telecommunications provider serving 4.6 million customers across 21 states with mobile phone, internet, and IoT services.
U.S. Cellular reported revenues of $891 million, down 6.2% year on year, falling short of analysts’ expectations by 3.1%. It was a disappointing quarter as it posted a significant miss of analysts’ EPS estimates.
U.S. Cellular delivered the weakest performance against analyst estimates in the group. As expected, the stock is down 10.9% since the results and currently trades at $61.18.
Read our full analysis of U.S. Cellular’s results here.
Telephone and Data Systems (NYSE: TDS)
Operating primarily through its majority-owned subsidiary UScellular and wholly-owned TDS Telecom, Telephone and Data Systems (NYSE: TDS) provides wireless, broadband, video, and voice communications services to 4.6 million wireless and 1.2 million broadband customers across the United States.
Telephone and Data Systems reported revenues of $1.15 billion, down 8.6% year on year. This print came in 2.1% below analysts' expectations. Overall, it was a disappointing quarter as it also produced a significant miss of analysts’ EPS estimates.
Telephone and Data Systems had the slowest revenue growth among its peers. The stock is down 7.9% since reporting and currently trades at $34.64.
Read our full, actionable report on Telephone and Data Systems here, it’s free.
Market Update
The Fed’s interest rate hikes throughout 2022 and 2023 have successfully cooled post-pandemic inflation, bringing it closer to the 2% target. Inflationary pressures have eased without tipping the economy into a recession, suggesting a soft landing. This stability, paired with recent rate cuts (0.5% in September 2024 and 0.25% in November 2024), fueled a strong year for the stock market in 2024. The markets surged further after Donald Trump’s presidential victory in November, with major indices reaching record highs in the days following the election. Still, questions remain about the direction of economic policy, as potential tariffs and corporate tax changes add uncertainty for 2025.
Want to invest in winners with rock-solid fundamentals? Check out our Hidden Gem Stocks and add them to your watchlist. These companies are poised for growth regardless of the political or macroeconomic climate.
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