The telecom sector's future is promising, with a strong focus on digitalization, cybersecurity, and emerging technologies like AI and cloud computing. In addition, the adoption of wireless networks, infrastructure investments, strong market competition, and ongoing innovations are driving growth for the sector.
Considering these factors, it could be wise to snatch up quality telecom stocks AT&T Inc. (T) and Verizon Communications Inc. (VZ) this June, which are Buy-rated in our proprietary POWR Ratings system.
The telecom industry is thriving due to the growth of the digital economy and the increased use of smartphones and smart electronics. Significant factors include the expansion of 5G, planning for 6G, personalized customer experiences, and robust mergers and acquisitions.
Consequently, cloud technology is enabling telecom organizations to migrate to the internet, contributing to market growth. Hence, the US telecom market is expected to grow at a CAGR of 3.7% until 2028. With AI transforming the U.S. telecom sector by streamlining network management, globally, AI use in telecom is expected to reach $21.20 billion by 2030, growing at an annual rate of 40.4%.
Globally, telecom companies are boosting their outlook by offering businesses security, cloud technology, AI, and collaboration tools to meet diverse connectivity needs. Industries like healthcare, manufacturing, and retail are adopting private wireless networks for better connectivity. The global telecom market is projected to grow at an annual rate of 6.2%, reaching $3.10 trillion by 2030.
Considering these conducive trends, let’s analyze the fundamentals of the two stocks from the Telecom - Domestic industry, beginning with the second choice.
Stock #2: AT&T Inc. (T)
T provides telecommunications and technology services worldwide. The company operates through two segments: Communications and Latin America. It operates in the Communications segment and the Latin America segment.
In terms of the trailing-12-month Return on Common Equity, T’s 13.15% is 300.2% higher than the 3.29% industry average. Its 3.41% trailing-12-month Return on Total Assets is 176.8% higher than the 1.23% industry average. Likewise, the stock’s 5.90% trailing-12-month Return on Total Capital is 65.7% higher than the 3.56% industry average.
For the first quarter ended March 31, 2024, T's total operating revenues stood at $30.03 billion. Its adjusted operating income rose marginally year-over-year to $6.01 billion, and adjusted EPS came in at $0.55, respectively. Also, T's adjusted EBITDA came in at $11.05 billion, up 4.3% year-over-year.
In addition, as of March 31, 2024, its total current liabilities amounted to $44.83 billion, compared to $51.13 billion as of December 31, 2023.
Analysts expect T’s revenue for the quarter ending June 30, 2024, to increase marginally year-over-year to $30.03 billion. Its EPS for fiscal 2025 is expected to grow 3% year-over-year to $2.27. It surpassed the Street EPS estimates in three of the trailing four quarters. Over the past nine months, T’s stock has gained 22.5% to close the last trading session at $18.12.
T’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a B grade for Value, and Quality. Within the Telecom - Domestic industry, it is ranked #5 out of 17 stocks. To see T’s Growth, Momentum, Stability, and Sentiment ratings, click here.
Stock #1: Verizon Communications Inc. (VZ)
VZ provides communications, technology, information, and entertainment products and services to consumers, businesses, and governmental entities worldwide. It operates in two segments: Verizon Consumer Group (Consumer), and Verizon Business Group (Business).
In terms of the trailing-12-month EBITDA margin, VZ’s 35.83% is 92.7% higher than the 18.59% industry average. Its 12.82% trailing-12-month Capex / Sales is 245.3% higher than the 3.71% industry average. Likewise, the stock’s 22.60% trailing-12-month EBIT margin is 154.8% higher than the 8.87% industry average.
VZ’s total revenues for the fiscal first quarter that ended March 31, 2024, increased marginally year-over-year to $32.98 billion. The company’s net income attributable to VZ and earnings per common share stood at $4.60 billion and $1.09, respectively. In addition, its total current assets as of March 31, 2024, stood at $37.96 billion, compared to $36.81 billion as of December 31, 2024.
For the quarter ending June 30, 2024, VZ’s revenue is expected to increase 1.2% year-over-year to $33 billion. Its EPS for the quarter ending December 31, 2024, is expected to increase 1.7% year-over-year to $1.10. VZ surpassed the consensus EPS estimates in three of the trailing four quarters. Over the past nine months, the stock has gained 20.5% to close the last trading session at $40.94.
VZ’s solid prospects are reflected in its POWR Ratings. It has an overall rating of B, equating to a Buy in our proprietary rating system.
It has a B grade for Stability. It is ranked #3 in the same industry. Click here to see VZ’s Growth, Value, Momentum, Sentiment, and Quality ratings.
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VZ shares were trading at $40.53 per share on Monday afternoon, down $0.41 (-1.00%). Year-to-date, VZ has gained 11.09%, versus a 12.93% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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