Due to its consistent demand, the telecom industry has long been a haven for stable investments. This industry has been evolving as telecom firms are expanding their fiber optic networks to support 5G wireless standards. With this altering ecosystem, customers are expected to experience significant enhancements in coverage and speed.
Given this positive sentiment, investors seeking both stability and moderate growth might consider three telecom stocks T-Mobile US, Inc. (TMUS), AT&T Inc. (T), and Verizon Communications Inc. (VZ).
Furthermore, with Trump’s second administration, it is likely to be believed that the telecom industry will have less regulation, which will cost less money to comply, making it a positive impact on the industry.
However, the Broadband Equity, Access, and Deployment (BEAD) Program provides $42.45 billion to expand high-speed internet access by funding planning, infrastructure deployment, and adoption programs in all 50 states. This program is expected to bring some robust years to all broadband constructions.
Many telecom companies are expanding beyond traditional services into media, cloud, and IoT sectors. According to a PwC report, the U.S. economy will be expected to add $15 billion by using 5G applications in industrial manufacturing by 2030.
Looking ahead, the future outlook of the telecom sector seems promising, with the global 5G infrastructure market projected to reach $590.18 billion by 2032, exhibiting a CAGR of 42.7%, and global connections forecasted to reach 7.9 billion by 2028, driven by innovation and collaboration.
Given these favorable market trends, let’s look at the fundamentals of the top three Telecom - Domestic stocks, beginning with the third choice.
Stock #3: T-Mobile US, Inc. (TMUS)
TMUS is a provider of mobile communications services, including voice, messaging, and data, under its flagship brands, T-Mobile and Metro by T-Mobile. It offers mobile communications services primarily using its 4G Long Term Evolution (LTE) network and its 5G technology network.
On October 8, TMUS announced the introduction of 5G on Demand, a complete, portable 5G private network and services solution that includes setup, teardown, and network management. This new solution will help cut costs and enhance operational efficiency and flexibility. It should also help TMUS secure a top spot in the communications industry as it is catering to the growing needs of its customers.
On September 18, demonstrating its commitment to returning value to shareholders, the company declared a quarterly dividend of $0.88 per share, up 35% from the previous quarter, payable to its shareholders on December 12, 2024. TMUS pays an annual dividend of $3.52, which translates to a yield of 1.51% at the current share price. Its four-year average dividend yield is 0.21%.
For the third quarter of 2024, which ended on September 30, TMUS’ total revenues increased 4.7% year-over-year to $20.16 billion, while its postpaid service revenues grew 8.3% from the same period last year to $13.31 billion.
The company’s adjusted EBITDA for the quarter amounted to $8.24 billion, representing an increase of 8.5% year-over-year. Its net income stood at $3.06 billion, up 42.8% year-over-year, while its earnings per share rose 43.4% from the prior year’s quarter to $2.61. Also, TMUS’ adjusted free cash flow grew 29% from the year-ago value to $5.16 billion.
Building on this quarter’s momentum, the company updated its guidance for 2024. TMUS anticipates that the full-year core adjusted EBITDA will range between $31.60 billion and $31.80 billion. It also forecasts adjusted free cash flow in the range of $16.70 billion to $17 billion and postpaid net customer additions between 5.6 million and 5.8 million.
The consensus revenue estimate of $21.40 billion for the fiscal fourth quarter (ending December 2024) represents a 4.5% increase year-over-year. The consensus EPS estimate of $2.30 for the current quarter indicates a 25.8% improvement year-over-year. The company has an impressive earnings surprise history; it surpassed the consensus revenue and EPS estimates in three of the trailing four quarters.
Moreover, TMUS’ EBIT has grown at CAGRs of 20.4% and 23% over the past three and five years, respectively. In addition, its diluted EPS increased at 48.8% CAGR over the past three years.
Over the past year, the stock has surged 59.4%, closing the last trading session at $235.47.
TMUS’ POWR Ratings reflect this robust outlook. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
TMUS has a B grade for Growth, Stability, Sentiment, and Quality. It is ranked #6 out of 20 stocks in the Telecom - Domestic industry. Click here to see the additional ratings for TMUS (Value and Momentum).
Stock #2: AT&T Inc. (T)
T is a leading global telecommunication, media, and technology service provider that operates through two segments: Communications and Latin America. It provides wireless and wireline telecom services to consumers and businesses worldwide.
On November 1, the company paid a quarterly dividend of $0.2775 per share. T pays an annual dividend of $1.11 per share, which translates to a yield of 4.88% on the prevailing share price. Also, its four-year average dividend yield is 6.35%.
On September 9, T expanded its high-speed fiber internet to new geographies, reaching more people. This expansion will be continued through joint ventures and other commercial open-access agreements aiming to expand Gigapower’s fiber footprint in new locations.
T’s operating revenues from service for the third quarter (ended September 30, 2024) increased marginally year-over-year to $25.13 billion. Its net income came in at $145 million, and its adjusted EPS stood at $0.60. Also, the company reported an adjusted EBITDA of $11.60 billion, indicating a 3.4% growth from the prior year’s quarter.
Looking ahead, T capital investment and free cash flow to be in the range of $21-$22 billion and $17-$18 billion, respectively. The company also projects adjusted EPS to fall between $2.15 and $2.25.
Analysts expect T’s revenue and EPS for the current year (ending December 2024) to be $122.19 billion and $2.21, respectively. For the fiscal year 2025, its revenue and EPS are expected to grow 1.4% and 2.4% from the prior year to $123.89 billion and $2.27, respectively.
T’s net income has grown at a CAGR of 98.7% over the past three years. Likewise, the company’s diluted EPS has increased at a CAGR of 110.4% over the past three years.
T shares have surged 43.6% over the past year and 34.5% over the past nine months to close the last trading session at $22.83.
T’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
It also has a B grade for Growth. Within the same Telecom - Domestic industry, it is ranked #5. Click here to see T’s ratings for Value, Momentum, Stability, Sentiment, and Quality.
Stock #1: Verizon Communications Inc. (VZ)
VZ offers consumers, businesses, and governmental agencies communications, information, and entertainment products and services. It operates through two segments, Verizon Consumer Group and Verizon Business Group, providing wireless and wireline communications services and products in the United States.
On November 1, buoyed by strong financial performance, the company paid its quarterly dividend, which increased by 1.25 cents to $0.6775 per share.
VZ has raised its annual dividend for 18 consecutive years. It pays an annual dividend of $2.71, which translates to a yield of 6.46% at the current share price. Its four-year average dividend yield is 5.90%. Moreover, the company’s dividend payouts have increased at an impressive CAGR of 2% over the past five years.
On September 30, VZ and Vertical Bridge entered into an agreement for Vertical Bridge to obtain the exclusive rights to lease, operate, and manage 6,339 wireless communications towers across all 50 states from VZ for $3.3 billion, with an upfront $2.8 billion in cash. This transaction will save VZ costs and create greater vendor diversity in the market.
In the fiscal third quarter that ended on September 30, 2024, VZ’s service revenues and other increased marginally year-over-year, amounting to $27.99 billion. The company’s consolidated adjusted EBITDA came in at $12.49 billion, up 2.1% year-over-year, and its EPS stood at $0.78. In addition, its total broadband subscribers stood at 11.9 million, representing an increase of nearly 16% year-over-year.
According to VZ’s guidance and outlook for its fiscal year 2024, it is projecting adjusted EBITDA to grow between 1% and 3%. Additionally, its adjusted EPS guidance ranges from $4.50 to $4.70. The company also expects total wireless services revenue growth to range between 2% and 3.5%.
Street expects VZ’s revenue for the fiscal fourth quarter (ending December 2024) to increase marginally year-over-year to $35.44 billion. Its EPS for the same period is expected to register a 2.9% growth from the prior year, settling at $1.11. In addition, it surpassed the consensus EPS estimates in three of the trailing four quarters, which is promising.
Over the past three and five years, VZ’s total assets grew at CAGRs of 2.6% and 6%, respectively.
The stock has gained 16.5% over the past year and 5.4% over the past nine months to close the last trading session at $42.22.
It’s no surprise that VZ has an overall rating of B, equating to a Buy in our POWR Ratings system. It has a B grade for Growth and Stability. Out of 20 stocks in the same industry, VZ is ranked #3.
Beyond what is stated above, we’ve also rated VZ for Value, Momentum, Sentiment, and Quality. Get all VZ ratings here.
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TMUS shares were trading at $236.83 per share on Thursday afternoon, up $1.36 (+0.58%). Year-to-date, TMUS has gained 49.35%, versus a 26.07% rise in the benchmark S&P 500 index during the same period.
About the Author: ShreyaRathi
