Telecom services are in high demand due to the increasing need for advanced connected technologies to facilitate hybrid working. In addition, the $1.20 trillion infrastructure Investment and Jobs Act passed last year has devoted $65 billion to nationwide broadband adoption, which should boost the domestic telecom sector.
Investors’ optimism about telecom stocks is evident in the SPDR S&P Telecom ETF’s (XTL) 2.8% gains over the past month compared to the SPDR S&P 500 Trust ETF’s (SPY) marginal decline over this period. Furthermore, telecom companies are investing heavily in the deployment of 5G infrastructures due to an increasing uptake of next-generation technologies and smartphone devices in the digital era, which is expected to keep driving the industry’s growth. Indeed, according to a report by Precedence Research, the global telecom services market is expected to grow at a 4.9% CAGR by 2030.
Given this backdrop, it could be wise to bet on fundamentally strong telecom stocks AT&T Inc. (T) and Verizon Communications Inc. (VZ).
AT&T Inc. (T)
T in Dallas, Tex., provides telecommunication, media, and technology services worldwide. Its communications segment offers wireless voice and data communications services. The company’s Latin America segment provides wireless and video services.
On April 21, 2022, John Stankey, AT&T CEO, said, “AT&T has entered a new era, meeting this opportunistic moment from a position of flexibility and strength thanks to our evolving networks, enhanced customer experience, growing 5G and fiber customer base and a much stronger balance sheet. And we continue to make good consistent progress on our journey to becoming America’s best broadband provider.”
T’s mobility revenue increased 5.5% year-over-year to $20.08 billion for its fiscal first quarter ended April 21, 2022. The company’s operating expenses declined 10.5% year-over-year to $32.46 billion. Also, its total assets came in at $577.20 billion for the period ended March 31, 2022, compared to $551.62 billion for the period ended Dec. 31, 2021.
T surpassed the Street’s EPS estimates in each of the trailing four quarters. The stock has gained 11.6% in price over the past month to close Friday’s trading session at $21.29.
It is no surprise that T has an overall B rating, which equates to a Buy in our POWR Ratings system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
Click here to see T’s ratings for Sentiment, Growth, Value, Momentum, Quality, and Stability. T is ranked #5 out of 21 stocks in the Telecom - Domestic industry.
Verizon Communications Inc. (VZ)
New York City-based VZ offers worldwide communications, technology, information, and entertainment products and services to consumers, businesses, and governmental entities. It has approximately 27 million wireless retail postpaid connections and 477,000 wireline broadband connections.
On May 5, 2022, VZ announced a dedicated strategy for stadium and venue customers in Europe and the Asia-Pacific region. This new strategy leverages the company’s innovative private 5G technology, its extensive industry expertise, and critical new technology partnerships.
VZ’s revenue has increased 2.1% year-over-year to $33.55 billion for its fiscal first quarter, ended March 31, 2022. The company’s operating income grew 0.3% year-over-year to $7.80 billion. Also, its total liabilities were $280.54 billion for the period ended March 31, 2022, compared to $283.40 billion for the period ended Dec. 31, 2021.
For its fiscal year 2023, analysts expect VZ’s EPS and revenue to increase 2.8% and 2.1%, respectively, year-over-year to $5.56 and $139.62 billion. It surpassed the consensus EPS estimates in each of the trailing four quarters. The stock has gained 6.1% in price over the past month to close Friday’s trading session at $51.40.
VZ’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to a Buy in our proprietary rating system. The stock has a B grade for Stability.
Within the Telecom - Domestic industry, VZ is ranked #4 out of 21 stocks. Click here to see the additional POWR Ratings for VZ (Value, Sentiment, Quality, Momentum, and Growth).
T shares fell $0.12 (-0.56%) in premarket trading Tuesday. Year-to-date, T has gained 18.08%, versus a -12.81% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles.
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