Leading diversified telecom service provider, Telephone & Data Systems Inc. (TDS), is slated to release its third-quarter 2014 results on Oct 31, before the opening bell.
In the last reported quarter, the company’s earnings missed the Zacks Consensus Estimate by 42.86%. Moreover, the company has delivered negative earnings surprises in all the prior four quarters, with an average miss of 91.06%. Let’s see how things are shaping up ahead of this announcement.
Factors to be Considered this Quarter
Telephone and Data Systems’ wireless business is expected to show strength buoyed by increased handset offerings, shared data plans, equipment financing and expansion of LTE technology. Continued focus on broadband growth and related acquisitions are expected to increase the company’s market share. Moreover, further expansion into the rapidly developing managed hosting and cloud service offerings will likely aid profitability going forward.
However, on the wireline front, the company faces competition from incumbent local exchange carriers. Also, within the wireless segment, customer churn remains a primary concern apart from a higher mix of smartphones, increased equipment cost, investments in network upgrade and higher subsidies on 4G LTE devices. Further, access line losses owing to wireless substitution and other alternative services coupled with decline in equipment sales remain detrimental to near-term growth.
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, 2 or 3 for this to happen. Unfortunately, that is not the case here as elaborated below.
Zacks ESP: Telephone and Data Systems’ earnings ESP is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are poised at a loss of 7 cents.
Zacks Rank: Telephone and Data Systems carries a Zacks Rank #2 (Buy) which increases the predictive power of ESP. However, a 0.00% ESP makes surprise prediction difficult.
Note that Sell-rated stocks (Zacks Rank #4 and 5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some companies to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
Lumos Networks Corp. (LMOS), with an earnings ESP of +15.39% and a Zacks Rank #2.
Ruckus Wireless, Inc. (RKUS), with an earnings ESP of +60.00% and a Zacks Rank #3 (Hold).
CenturyLink, Inc. (CTL), with an earnings ESP of +1.61% and a Zacks Rank #3.
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