{"id":5818,"date":"2016-03-20T20:24:28","date_gmt":"2016-03-20T20:24:28","guid":{"rendered":"https:\/\/fundamentalis.com\/?p=5818"},"modified":"2016-03-20T20:24:28","modified_gmt":"2016-03-20T20:24:28","slug":"sector-earnings-update-can-telco-sustain-the-upside-momentum","status":"publish","type":"post","link":"https:\/\/fundamentalis.com\/?p=5818","title":{"rendered":"Sector Earnings Update: Can Telco Sustain the Upside Momentum ?"},"content":{"rendered":"

I wanted to post this data just to show how sector earnings data can be useful. from Thomson and Factset, and how forward estimates can be impacted by M&A.<\/p>\n

Here is the spreadsheet detailing the trends in revenue and forward earnings estimates for the Telecom sector:\u00a0FC – Telco32016<\/a><\/p>\n

Q4 ’15 was the strongest quarter of Telco earnings growth in years, per FCSP500EPSrevgro(qtrly)<\/a>, and much of it had to do with AT&T’s acquisition of DirecTV. Prior to T closing the DirecTV acquisition, T was expecting 1% revenue growth in 2015, but after the Q3 ’15 closing, expected T revenue growth for 2015 shot up to +12% and also finished the year at +12.<\/p>\n

Note how revenue and EPS growth accelerated for Telco through 2015 (second spreadsheet), and then look at the first link again and see what 2016 holds for the sector.<\/p>\n

The fascinating thing to me is that there are just 5 companies left in the Telco sector per the Thomson Reuters data, and the two 800 lb gorilla’s are T and VZ.\u00a0Why doesn’t Standard & Poors simply roll up the Telco sector into the Technology sector as Transports were done with Industrial’s year ago and leave it at that ? With Telco just 2% – 3% of the SP 500 by market cap, it is relatively insignificant to the index, although there are a lot of income investors and elderly piled into the stocks for the dividend no doubt.<\/p>\n

As a long-time fan of T, both as a customer and investor, I am watching the stock here, without any positions in either T or VZ. The ability for AT&T to drive free-cash-flow and “synergies” (i.e. expense savings) from the DirecTV merger is crucial. We’ll find out more in April ’16 on how T is doing integrating DirecTV.<\/p>\n

Here is the weekly chart of T showing it near the top of an 6-year trading range:<\/p>\n

\"click<\/a>
click to enlarge<\/figcaption><\/figure>\n

 <\/p>\n

A trade through $38 – $39 on heavy volume and T makes sense as a capital appreciation play, as much as a dividend play.<\/p>\n

No question though, the earnings expectations for 2016 are subdued.<\/p>\n

VZ is testing the 2013 near $53.81 and T is testing the 2012 and 2013 highs near $38.50 – $38.80. Both stocks are at the high end of multi-year trading ranges.<\/p>\n

Be careful out there.<\/p>\n

 <\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

I wanted to post this data just to show how sector earnings data can be useful. from Thomson and Factset,…<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[136,177,64],"tags":[],"class_list":["post-5818","post","type-post","status-publish","format-standard","hentry","category-att-t","category-telco","category-vz"],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"post_mailing_queue_ids":[],"_links":{"self":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/5818","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=5818"}],"version-history":[{"count":6,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/5818\/revisions"}],"predecessor-version":[{"id":5827,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/5818\/revisions\/5827"}],"wp:attachment":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=5818"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=5818"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=5818"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}