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BofA focuses on three key stocks related to telecoms third-quarter earnings (NYSE:VZ)


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Looking ahead to third-quarter results across telecoms and telecommunications services, BofA is focusing on the most convincing impressions and the areas where it diverges the most from the Wall Street consensus.

That applies to its impressions on the big wireless trio noted analyst David Barden, highlighting the largest deltas in his estimate.

On AT&T (NYSE:BILLION), Street consensus on adding postpaid phone networks is too low, he said, because AT&T would benefit from a larger pool of companies switching services and advertising. He estimates that number at 687,000, compared with a consensus of 582,000 (and even that number is being dragged down by a “very unlikely” low-end estimate of 130,000, he said).

On the other hand, Street is probably too high for its estimate for T-Mobile’s (TMUS) core adjusted earnings before interest, taxes, depreciation and amortization, he noted, forecasting that figure to be at $6.5 billion versus the consensus of $6.7 billion.

There, the site outage will essentially end in Q3, he said. The company ended the second quarter with “two-thirds of its 35,000-site shutdown target achieved and the remaining one-third expected to be substantially completed in three quarters.” High consensus for T-Mobile (TMUS) may not fully account for “the iPhone launch during the quarter, VZ’s increased advertising activity, and 4Q-counted benefits downtime,” Barden said.

And on Verizon (NYSE:VZ), Barden argues that Street’s expectations for consumers’ postpaid time off are too low.

Barden writes: “Following a price hike late last quarter, VZ flagged its expectations for a temporary increase in consumer postpaid phone prices in the third quarter of 2022. The churn bubble is expected to affect the third quarter”.

But he expects the bubble to push rates up to 0.89% in Q3, compared with consensus of 0.84%. However, a drop in the Churn would help lift the net gain reported in the fourth quarter of the important holiday season.

Verizon (VZ) is one of his key stocks when it comes to results, with the leadership gap narrowing. Along with the soft net increase due to increased business, he expects the company to show average revenue growth per account and total, thanks to new promotions and plans “, but its challenge is to build momentum and move from a postpaid phone net loss to a net addition positive.”

He remains Neutral on stocks, expecting longer-term guidance cuts to arrive in the first quarter of 2023. Verizon (VZ) report earnings before the market opens next Thursday, October 21.

Another important stock to watch is Lumen Technologies (NYSE:LUMN), which keeps an eye on the new management’s next steps (Kate Johnson was dubbed New CEO on September 13and the company has a New CFO in April).

“We understand the team’s priorities … are (1) investing in growth and (2) managing leverage,” Barden said, adding “We continue to believe that a dividend cut is a no-no. It’s inevitable for the foreseeable future. Just as it’s inevitable the rapid negative reaction of earnings-focused retail money represents the majority of the shareholder base.”

Another key BofA stock to watch in this area is Crown Castle (NYSE:CCI), will be the “first and only” communications infrastructure company to share the 2023 guidance this quarter. That will provide a read-through of domestic rentals at American Tower (AMT) and SBA Communications (SBAC), Barden said.

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