Who Is the King of Telecom Stocks — Sprint, AT&T or Verizon?

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many_cell_phones_wireless_185_flickrCommunication. It really does make the world go round. Of course today, staying connected isn’t just about face-to-face interaction. Now, keeping in touch, conducting business, learning the latest news and a thousand other activities are accomplished through telecommunications.

The industry has become a linchpin for modern society. From telephones and television to the Internet and wireless mobility, telecommunications is the driving force behind some of our most routine daily tasks, and since several of the industry’s top players have just reported earnings, now is the perfect time to examine and reevaluate how telecommunication companies are performing in the current market environment.

Telecom isn’t simply about providing home and business phone service anymore. The ever evolving wireless revolution has turned the telecommunications field into a cutthroat arena. Expanding technology forces companies to stay sharp and makes the battle to be Number 1 all the more ruthless.

A Big Three Throwdown

It’s nearly impossible to turn on the TV, read the newspaper or listen to the radio without seeing or hearing an advertisement for the latest cell phone or enhanced Internet service. We are all, to some extent, wrapped up in this mobile age. Everything must be wireless, fit in the palm of your hand and be accessible by a few swipes of your fingertip.

If nothing else, telecommunication companies know how to market and make consumers want their services. But is that want translating into profits? Which of the top telecommunications providers is really the best buy for investors? Let’s break down the facts:

Sprint

The No. 3 wireless carrier in the U.S. right now is Sprint Nextel Corp. (NYSE:S). It seems that Sprint is constantly trying to play catch-up and erase the distance between it and the top two carriers in the country. In recent quarters, the company has suffered from minimal sales growth and earnings losses.

Last week, the company reported earnings that posited some positive results. For the third quarter, the company reported its smallest quarterly loss in over four years. Sprint’s net loss was $0.10 share, while revenue rose 2.2% to $8.3 billion. This was the best performance by the company since its $64 million profit in the third quarter of 2007. The company also managed to improve its subscriber base by adding 1.3 million subscribers in the quarter.

Unfortunately, this bit of news hasn’t down much for raising the stock’s outlook in my book. The stock receives particularly poor grades for sales growth, cash flow and analyst revisions, which does not offer much hope for the stock’s upcoming performance.

Verizon

The next telecom company on the list is Verizon Communications Inc. (NYSE:VZ). The No. 2 telecommunications company has been hard at work trying to steal ground away from its competitors, and the work is beginning to show.

Due to pension accounting affects, Verizon’s earnings more than doubled in the third quarter. The company’s net income rose to $1.38 billion (or $0.49 per share) compared to $659 million  (or $0.23 per share) in the third quarter of 2010. On an adjusted basis, earnings came in at $0.56 per share — a penny above analysts’ estimates. Revenue rose 5.4% to $27.9 billion. Verizon also managed to add 882,000 contract subscribers in the quarter, more than rival AT&T Inc. (NYSE:T), but below analysts’ estimates of 950,000.

Still, VZ maintains a great outlook. Now that the company has access to Apple‘s (NASDAQ:AAPL) iPhones and the 4S edition flying off the shelves, we’ll likely see Verizon continue to pick up steam.

AT&T

Finally, we have telecom giant AT&T Inc. AT&T has long been at the top of diversified telecommunication services. Like its competitors, AT&T has realized being at the top of the industry requires offering a diverse range of services — everything from custom phone and Internet plans to selling large assortments of wireless accessories.

So far this year, a major trend in telecommunications has been a slowdown in growth. Just like Verizon, AT&T felt the pang of slower-than-expected growth. For both companies, this is partly due to the delayed launch of Apple’s latest iPhone model, whose sales will now be rolled into the fourth quarter.

Third-quarter earnings show that AT&T earnings of $0.61 were in line with estimates. However, the company’s revenue of $31.48 billion missed analysts’ predictions of $31.6 billion and upset investors. Company officials tried to gain confidence by assuring sales would pick back up in the fourth-quarter due to big sales in the iPhone — not to mention the upcoming holiday rush. Regardless, the company did add 319,000 new subscribers in the quarter.

I don’t see AT&T remaining in hold territory long, especially considering the strong standing it’s held for most of the year.

So we’ve gone over the cases for the top three names in telecommunications and what their latest numbers mean for investors. In this three-way match up the winner is clear:

The Verizon brand gained enormous recognition for its, “Can you hear me now?” slogan. The answer is, “Yes, yes we can”. Verizon and its growing potential should be coming in loud and clear for investors.

Make Room for the Little Guys

AT&T, Sprint and Verizon may be the biggest names in the telecommunications industry, but they are far from being the only companies around. Several smaller, and less well-known, companies are making their presence more dominant in the field.

We still have some time left in the third-quarter earnings season and there will be more big news for the telecommunications industry coming down the line.

On Tuesday, MetroPCS Communications Inc. (NYSE:PCS) reported its third-quarter earnings. The pay-as-you-go provider continued the trend of slow growth for its second consecutive quarter.

Earnings fell from $0.22 per share last year to $0.19 per share in the last quarter. Analysts had expected $0.23 per share. Sales did manage to increase a strong 18% to $1.2 billion, falling in line with analysts estimates. MetroPCS is facing growing competition now that larger rivals like AT&T and Sprint are infringing on its market and offering prepaid service plans.

Here are a couple of more telecommunications stocks that will release earnings soon. Wednesday Nov. 2, CenturyLink Inc. (NYSE:CTL) will announce its latest quarterly results. Analysts are expecting earnings of $0.34 per share on revenue of $4.6 billion. That’s over 163% sales growth, but a 59% drop in earnings growth compared with the third quarter of 2010.

Then on Thursday, Nov. 10, Deutsche Telekom AG (PINK:DTEGY), the parent company of T-Mobile USA, will report earnings.


Article printed from InvestorPlace Media, https://investorplace.com/2011/11/telecom-s-t-vz-pcs-ctl-dtegy/.

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