Will Top-Line Woes Dent U.S. Cellular's (USM) Q2 Earnings?

United States Cellular Corporation USM is scheduled to report second-quarter 2020 results on Aug 6, after the closing bell. In the last reported quarter, the company delivered an earnings surprise of 62%. Notably, the company has a trailing four-quarter earnings surprise of 104.1%, on average. The company is expected to have recorded lower consolidated revenues in the second quarter on a year-over-year basis due to coronavirus-induced turmoil.

Factors at Play

During the quarter under review, U.S. Cellular reinforced its commitment to bring 5G connectivity to rural and urban regions of the country by joining the Open RAN Policy Coalition – a group of companies formed to promote the adoption of open and interoperable solutions in the RAN (Radio Access Network). The company is actively promoting policies to spur innovation and deploy 5G technology in rural communities. This is likely to have aided the top line of the company in the quarter to be reported.

In the second quarter, the company collaborated with Ericsson to strengthen its mobile broadband capacity to cater to the increased demand for data usage amid the virus outbreak. Together, the firms added incremental capacity to more than 200 sites for higher broadband requirements. The company’s second-quarter performance is expected to have benefited from these developments.

However, high infrastructure investments for 5G deployment are likely to have led to soft margins during the quarter. In addition, low-priced plans to lure customers are expected to have hurt its bottom line.

For the June quarter, the Zacks Consensus Estimate for total revenues is pegged at $912 million that indicates a 6.3% decline from the year-ago quarter’s reported figure. The consensus mark for adjusted earnings are pegged at 23 cents per share, which calls for a decline of 34.3% from the prior-year quarter’s reported figure.

What Our Model Says

Our proven model doesn’t conclusively predict an earnings beat for T-Mobile this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here.

Earnings ESP: U.S. Cellular’s Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +0.97%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

United States Cellular Corporation Price and EPS Surprise

United States Cellular Corporation Price and EPS Surprise

United States Cellular Corporation price-eps-surprise | United States Cellular Corporation Quote

Zacks Rank: U.S. Cellular currently carries a Zacks Rank #4 (Sell).

Stocks to Consider

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season:

Cogent Communications Holdings, Inc. CCOI is set to release quarterly numbers on Aug 6. It has an Earnings ESP of +11.66% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Earnings ESP for InterDigital, Inc. IDCC is +4.28% and it carries a Zacks Rank of 3. The company is set to report quarterly numbers on Aug 6.

The Earnings ESP for Maxar Technologies Ltd. MAXR is +31.71% and it sports a Zacks Rank of 1. The company is scheduled to report quarterly numbers on Aug 5.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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