Tag Archives: WIN

Trade Restrictions Continue to Haunt Telecom Stocks

Over the last five trading days, telecom stocks flattered to deceive as the initial upturn was replaced by a sustained downturn on concerns over the implications of the fresh restrictions issued by the U.S. government against Chinese telecom companies.

Trade Restrictions Continue to Haunt Telecom StocksSource: Shutterstock

Last week, Treasury Secretary Steven Mnuchin led a delegation of U.S. officials in China to defuse the tensions between the two warring countries while Liu He, the top economic adviser of President Xi Jinping, headed the Chinese side in the talks. The Chinese officials made solemn representations to the visiting delegates to convey the plight of ZTE that invited most of the wrath of the Trump administration.

ZTE also formally appealed to the U.S. Commerce Department’s Bureau of Industry and Security to suspend the seven-year ban on its products that threatened its survival and crippled operations.

Regarding company-specific news, earnings of some telecom companies along with improved product launches for superior connectivity and high-quality content to subscribers at lower cost of ownership, and acquisitions topped the charts. The industry’s earnings in general appear to be on strong footing backed by healthy growth dynamics thanks to the existing secular trends in cloud computing, artificial intelligence and Big Data.

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 Trade Restrictions Continue to Haunt Telecom Stocks: Motorola Solutions Inc (MSI)

Motorola Solutions Inc (NYSE:MSI) reported strong first-quarter 2018 results on the back of healthy growth across all geographic regions. Non-GAAP earnings for the reported quarter were $1.10 per share compared with 71 cents in the year-ago quarter, primarily driven by top-line growth. The bottom line exceeded the Zacks Consensus Estimate of 86 cents.

Net sales in the reported quarter came in at $1,468 million compared with $1,281 million in the year-ago quarter, driven by organic growth of 10% and healthy performance across all regions. Quarterly sales exceeded the Zacks Consensus Estimate of $1,371 million.

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 Trade Restrictions Continue to Haunt Telecom Stocks: Sprint Corp (S)

Sprint Corp (NYSE:S) reported healthy fourth-quarter fiscal 2017 results, wherein both the top line and the bottom line surpassed the Zacks Consensus Estimate. The U.S. national wireless carrier delivered record financial results with highest ever net income and operating income in fiscal 2017.

Net income for the reported quarter improved to $69 million from a net loss of $283 million in the year-ago quarter, supported by lower operating expenses and income tax benefit. Earnings per share for the reported quarter came in at 2 cents against a loss of 7 cents in the previous-year quarter. The bottom line surpassed the Zacks Consensus Estimate of a loss of 6 cents.

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 Trade Restrictions Continue to Haunt Telecom Stocks: Windstream Holdings Inc (WIN)

Windstream Holdings Inc (NASDAQ:WIN) reported tepid first-quarter 2018 financial results, wherein both the top line and the bottom line missed the respective Zacks Consensus Estimate. However, both the figures improved on a year-over-year basis.

For the reported quarter, the company incurred a net loss of $121.4 million or a loss of 65 cents per share compared with a net loss of $111.3 million or a loss of 89 cents per share in the year-ago quarter. The bottom line was wider than the Zacks Consensus Estimate of a loss of 59 cents. Total revenues increased 6% year over year to $1,454.3 million but missed the Zacks Consensus Estimate of $1,464 million.

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 Trade Restrictions Continue to Haunt Telecom Stocks: Nokia Oyj (NOK)

Nokia Oyj (NYSE:NOK) inked a deal to acquire SpaceTime Insight, a California-based IoT startup, for an undisclosed amount. The deal is aimed at expanding Nokia’s IoT portfolio and IoT analytics capabilities while expediting the development of new IoT applications for key vertical markets.

The buyout supports Nokia’s software strategy and leverages SpaceTime’s sales expertise and proven track record in IoT application development, machine learning and data science to augment the efficacy of the Nokia Software IoT product unit.

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 Trade Restrictions Continue to Haunt Telecom Stocks: Qualcomm, Inc. (QCOM)

According to a Bloomberg report, Qualcomm, Inc. (NASDAQ:QCOM) is mulling to exit the market for production of high-end processors for data-center servers in order to focus on its core businesses. While the endeavor would help the company save millions of dollars through reduced R&D expenses, it would also increase its dependence on slow-growing market for mobile-phone chips.

Moreover, aggressive competition in the mobile phone chipset market is likely to hurt profits in the future. Although the global smartphone market is expected to maintain its momentum in the next four to five years, a major part of this growth is likely to come from low-cost emerging markets, which is likely to exert pressure on margins.

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Price Performance

The following table shows the price movement of some the major telecom stocks over the past week and during the last six months.

In the last five trading days, Harris Corporation (NYSE:HRS) was the major gainer with its share price rising 5.6% while Verizon Communications Inc. (NYSE:VZ) was the major decliner, with its stock losing 3%.

Trade Restrictions Continue to Haunt Telecom Stocks

Over the last six months, Motorola was the best performer with its stock appreciating 13.6% while Qualcomm was the major decliner with its shares falling 25.1%.

Over the last six months, the Zacks Telecommunications Services industry underperformed the benchmark S&P 500 index with an average decline of 4.1% against a gain of 4.3% for the latter.

Trade Restrictions Continue to Haunt Telecom Stocks

What’s Next in the Telecom Space?

In addition to continued product launches and deployment of 5G technologies, all eyes will remain glued to the latest developments in the trade war and how the U.S. administration responds to the ZTE plea.

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3 Dividend Stocks for In-the-Know Investors

Finding dividend stocks that provide the right amount of growth, long-term stability, and consistent yields can be difficult. But they aren’t impossible to find, if you know where to look.

To help you track down a few of these companies for your portfolio, we reached out to some Motley Fool contributors for dividend stock ideas. They came back with Uniti Group (NASDAQ:UNIT), AbbVie (NYSE:ABBV), and American Tower (NYSE:AMT). Here’s why.

A jar filled with coins and labeled "dividends"

Image source: Getty Images.

The best telecom REIT you’ve never heard of

Anders Bylund (Uniti Group): This real estate investment trust currently has a 12.6% dividend yield, which is often a red flag. Extremely high yields tend to come with very low share prices, which in turn is a healthy market reaction to deeply troubled business operations.

But maybe pigs do fly after all. This huge yield seems to stem from a misunderstanding, not some profound insight about impending doom.

It’s true that Uniti is tethered to another company that really does deserve plenty of crimson-flag-waving. Regional telecom Windstream Holdings (NASDAQ:WIN) reported a $2.1 billion net loss over the last four quarters, along with roughly breakeven free cash flow and negative EBITDA (earnings before interest, taxes, depreciation, and amortization) profit. Uniti is the new embodiment of Windstream’s former network infrastructure operations, which were spun out as a stand-alone business three years ago. Since then, Windstream’s future has only darkened, while Uniti has been edging away from its old parent company in many ways.

Sometimes, Uniti is punished for Windstream’s sins. But it’s obvious to me that Uniti walked away from the 2015 separation with the better deal. What we see today is a struggling telecom that spun out its most valuable and effective operations in a Hail Mary attempt to gain some financial stability. In the future, I fully expect Windstream to either go bankrupt or agree to a pennies-on-the-dollar buyout, just to salvage a tiny bit of shareholder and debt-writer value. When that happens, Uniti will go on supplying its services through some 4.8 million miles of fiber-optic network strands and 700 wireless towers, but to a whole new set of clients.

If and when that day comes, Uniti shares will take another big hit as many investors expect the dying Windstream to drag this company down behind it. Maybe I’ll buy more shares at that point, because Uniti’s long-term story is solid.

And in the meantime, you can’t beat that ultragenerous dividend yield.

A top income stock that’s in the bargain bin

Todd Campbell (AbbVie): If you typically don’t invest in healthcare, you might not know that shares in the biopharma giant AbbVie fell out of favor last month, following disappointing news on its solid-tumor cancer drug, Rova-T.

AbbVie had hoped definitive midstage trial data for Rova-T could allow it to file for accelerated approval from the Food and Drug Administration, but unfortunately, the data wasn’t good enough for that to happen. Instead, the company will need to wait until results from future trials are available before it submits Rova-T for approval, and that could mean a wait of a year or more.

The setback caused AbbVie’s shares to fall by more than 20%, but it’s far from a deal-breaker for the company. Importantly, the sell-off could be creating a great opportunity to add this top dividend stock to your income portfolios.

AbbVie inherited Abbott Labs’ dividend track record when it was spun off in 2013, so it’s considered a Dividend Aristocrat. It appears to take that badge of honor seriously, because its quarterly dividend has increased to $0.96 from $0.40 since its initial public offering.

Following the drop in its shares, its forward dividend yield has increased to almost 4%. That’s a healthy dividend for any company, but what really makes AbbVie an interesting buy is that its dividend could continue climbing because of double-digit revenue growth. In Q1 2018, sales grew 21% year over year. And since generic biosimilars to its best-seller, Humira, aren’t expected in the U.S. until 2023, there’s plenty of opportunity for investors to own AbbVie and pocket increasingly larger dividend checks.

A company sending a strong signal to dividend investors

Chris Neiger (American Tower): American Tower may not be a household name, but its business is as ubiquitous as it can get. The company owns more than 160,000 cell tower sites throughout the U.S. and across the globe, and rents out the space to wireless carriers. This means that in the U.S. the top wireless service providers pay American Tower to put up signals on its towers, and when they need more capacity — and carriers always do — they have to fork over more money to American Tower.

The demand for wireless data is poised to increase: From 2016 to 2021, mobile data usage is expected to jump 700%. American Tower benefits by entering into long-term lease agreements; the stability from those contracts allows the company to earn about 99% of its sales from recurring revenue.

The great news for dividend investors is that American Tower is a real estate investment trust (REIT), which means that the majority of its net income is paid out as dividends. So as data usage grows — and revenue and income increase — so do the company’s dividends.

American Tower can experience up and downs in sales and earnings just like any other company, and in the first quarter its revenue climbed 7.8% year over year, but earnings fell 8.8%. But that shouldn’t discourage investors. Management expects full-year 2018 sales to increase by 6% and net earnings to rise by 13% year over year, both at the midpoint of guidance.

The company should also benefit from the ongoing wireless evolution, including the upcoming 5G standard. Carriers are already testing 5G, and as they ramp up usage they’ll have to update and expand their signals on cell towers.

American Tower pays a forward yield of 2.19% right now, and has raised its dividend for a modest, but not insignificant, six consecutive years. If you’re looking for a bet on the future of wireless communication — and want a reliable dividend too — you may want to consider this towering tech play.