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Telephone and Data Systems (TDS) Earnings Preview for Q4

Telephone and Data Systems TDS is slated to report fourth-quarter 2017 results on Feb 23, before the opening bell.

The Zacks Consensus Estimate for revenues is pegged at $1.29 billion, reflecting year-over-year growth of 0.9%. The consensus estimate for the bottom line is pegged at a loss of 2 cents per share, indicating year-over-year growth of 60%.

The company has a mixed earnings surprise history. Earnings lagged the Zacks Consensus Estimate in the last two quarters and surpassed the same in one of the previous four quarters. The company’s bottom line met the Zacks Consensus Estimate in the remaining quarter, delivering an average beat of 779.1%.

Let’s see how things are shaping up for this announcement.

Factors Likely to Influence Q4 Earnings

Telephone & Data Systems continues to compete with the likes of CenturyLink CTL and Frontier Communications to name a few. Additionally, the company’s wireless division – United States Cellular USM – continues to operate in an intensely competitive wireless market and remains significantly challenged by the offering of service plans from lower-cost mobile operators. We further believe that high costs associated with network integration and construction of new cell sites, aggressive equipment pricing, increasing capacity in existing cell sites, wireless technology upgrades and spectrum licensing will put considerable pressure on the company’s finances.

However, Telephone and Data Systems’ efforts to reward its shareholders with a fourth-quarter 2017 dividend of 15.5 cents per Common Share and Series A Common Share are impressive. The dividend was paid on Dec 28, 2017, to shareholders of record as of Dec 15, 2017. The move indicates the company’s commitment to create value for shareholders and underlines its confidence in business growth.

Telephone and Data Systems is looking for lucrative opportunities to bring more fiber in order to better address services. By leveraging on fiber, the telco is trying to respond to customers' growing TV and broadband service demand. The company continues to expand its business in the managed hosting and cloud service market. Launch of Shared Data plans at nominal prices is likely to help the company gain consumers. The company's IPTV is also doing considerably well. It continues to experience strong smartphone demand at its wireless wing, U.S. Cellular.

Earnings Whispers

Our proven model does not conclusively show that Telephone and Data Systems is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here as elaborated below.

Zacks ESP: Telephone and Data Systems has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at a loss of 2 cents per share. You can uncover the best stocks to buy or sell before they’re reported with the Earnings ESP Filter.

Zacks Rank: Telephone and Data Systems has a Zacks Rank #3, which increases the predictive power of ESP. However, the company’s 0.00% ESP makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Key Pick

Edison International EIX from the broader Utilities sector has the right combination of elements to post an earnings beat in fourth-quarter 2017, scheduled to be reported on Feb 22. It has an Earnings ESP of +1.44% and has a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

The company’s earnings surpassed the Zacks Consensus Estimate in three of the previous four quarters with an average beat of 9.08%.

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United States Cellular Corporation (USM): Free Stock Analysis Report
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