The telecom industry has been flourishing amid solid demand as companies ramp up their offerings to provide high-speed network connectivity. Continued digital transformation and hybrid lifestyles have driven the demand for better connectivity for telecom services.
The ongoing 5G race has led companies in this space to invest heavily in deploying 5G infrastructures to meet the demand for high-speed, continuous data connectivity and enhanced customer experience. With the increasing uptake of next-generation technologies and constant innovation, the global telecom market is expected to reach $3.82 trillion in 2026, growing at a 7.4% CAGR.
Moreover, President Biden’s Bipartisan Infrastructure Law provides a $65 billion investment to expand high-speed internet in communities across the United States. On August 11, 2022, the National Telecommunications and Information Administration (NTIA) granted more than $146 million in funds from the Consolidated Appropriations Act 2021 to tribal entities in New Mexico.
Investors’ optimism about telecom stocks is evident from the SPDR S&P Telecom ETF’s (XTL) 4.3% gains over the past three months. Therefore, investing in fundamentally strong telecom stocks Verizon Communications Inc. (VZ) and AT&T Inc. (T) could be wise.
Verizon Communications Inc. (VZ)
VZ offers communication, information, and entertainment products and services to consumers, businesses, and governmental agencies. The company operates through two segments: Consumer Group; and Business Group, providing wireless and wireline communications services and products in the United States.
On August 6, 2022, the company’s Board of Directors increased its quarterly dividend by $1.25 per share to $65.25 per share. VZ has the longest streak of increasing quarterly dividends for 16 consecutive years within the U.S. telecom industry. This reflects its strong cash flows.
On July 26, 2022, VZ introduced the Lenovo ThinkPad X13s, a business-ready PC to leverage full 5G Ultra-Wideband connectivity. This new launch reflects the company’s full capabilities in accelerating its 5G Ultra-Wideband network and is expected to be highly demanded by consumers.
During the second quarter ended June 30, 2022, VZ’s total operating revenues grew marginally year-over-year to $33.79 billion. Its wireless equipment revenues rose 20.4% from the year-ago value to $6.67 billion. Also, its total assets came in at $370.15 billion for the quarter ended June 30, 2022, compared to $366.60 billion for the fiscal year ended December 31, 2021.
The consensus EPS estimate of $5.28 for fiscal 2023 (ending December 2023) represents a 2% improvement year-over-year. The consensus revenue estimate of $33.87 billion for the third quarter ending September 30, 2022, indicates a 2.9% increase year-over-year. The company has an impressive earnings surprise history; it surpassed the consensus EPS estimates in three of the trailing four quarters.
The stock has lost 5.5% over the past month to close the last trading session at $42.24.
VZ’s POWR Ratings reflect this promising outlook. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a B grade for Stability. Within the 20 stocks in the Telecom - Domestic industry, it is ranked #5. To see the additional ratings of VZ for Growth, Value, Momentum, Sentiment, and Quality, click here.
AT&T Inc. (T)
T is a leading global telecommunication, media, and technology service provider. The company operates through three segments: Communication, WarnerMedia, and Latin America.
On August 30, 2022, T announced the expansion of its fiber internet services to Arizona. John Stankey, T’s CEO, said, "Fiber is hands-down the best technology to deliver high-speed broadband, and this expansion is allowing AT&T to aggressively roll out service to the Mesa area."
On August 4, 2022, the company and Warner Bros. Discovery announced an agreement allowing T to continue offering internet and mobility customers access to HBO Max’s original programming and series portfolio. This demonstrates the company’s proven excellence in the field and marks an important step in its continued success.
T’s fiscal second quarter (ended June 30, 2022), net income increased 164.8% year-over-year to $4.16 billion. The company’s operating expenses decreased 12.3% from the year-ago value to $24.69 billion. Also, its EPS grew 154.5% year-over-year to $0.56.
The company has an excellent earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past nine months, the stock has declined marginally to close the last trading session at $17.03.
T’s POWR Ratings reflect solid prospects. The stock has an overall B rating, which translates to Buy in our proprietary rating system.
It has a B grade for Value. Within the same industry, it is ranked #4. Click here to see the POWR Ratings of T for Growth, Momentum, Stability, Sentiment, and Quality.
VZ shares were trading at $42.53 per share on Monday morning, up $0.29 (+0.69%). Year-to-date, VZ has declined -15.10%, versus a -12.73% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
2 Telecom Stocks to Buy Before the End of This Year StockNews.com
