Let’s dig into the relative performance of Telephone and Data Systems (NYSE:TDS) and its peers as we unravel the now-completed Q2 terrestrial telecommunication services earnings season.
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 satisfactory Q2. As a group, revenues were in line with analysts’ consensus estimates.
While some terrestrial telecommunication services stocks have fared somewhat better than others, they have collectively declined. On average, share prices are down 2.7% since the latest earnings results.
Weakest Q2: 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 $1.19 billion, down 4.2% year on year. This print exceeded analysts’ expectations by 1.5%. Despite the top-line beat, it was still a softer quarter for the company with a significant miss of analysts’ EPS estimates.
"TDS has made significant progress on its strategic priorities," said Walter Carlson, TDS President and CEO.
The market was likely pricing in the results, and the stock is flat since reporting. It currently trades at $39.07.
Read our full report on Telephone and Data Systems here, it’s free.
Best Q2: 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 $3.09 billion, down 5.4% year on year, falling short of analysts’ expectations by 0.7%. However, the business still had a very strong quarter with a beat of analysts’ EPS estimates.
However, the results were likely priced into the stock as it’s traded sideways since reporting. Shares currently sit at $4.45.
Is now the time to buy Lumen? Access our full analysis of the earnings results here, it’s free.
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 $916 million, down 1.2% year on year, exceeding analysts’ expectations by 1.5%. It may have had the worst quarter among its peers, but its results were still good as it also locked in a beat of analysts’ EPS estimates.
Interestingly, the stock is up 3.6% since the results and currently trades at $77.01.
Read our full analysis of U.S. Cellular’s results here.
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 $246.2 million, down 5.5% year on year. This result lagged analysts' expectations by 0.7%. Aside from that, it was a very strong quarter as it recorded a beat of analysts’ EPS estimates.
Cogent had the weakest performance against analyst estimates and slowest revenue growth among its peers. The stock is down 14.5% since reporting and currently trades at $37.50.
Read our full, actionable report on Cogent here, it’s free.
Market Update
Thanks to the Fed’s series of rate hikes in 2022 and 2023, inflation has cooled significantly from its post-pandemic highs, drawing closer to the 2% goal. This disinflation has occurred without severely impacting economic growth, suggesting the success of a soft landing. The stock market thrived in 2024, spurred by recent rate cuts (0.5% in September and 0.25% in November), and a notable surge followed Donald Trump’s presidential election win in November, propelling indices to historic highs. Nonetheless, the outlook for 2025 remains clouded by potential trade policy changes and corporate tax discussions, which could impact business confidence and growth. The path forward holds both optimism and caution as new policies take shape.
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