As the Q2 earnings season wraps, let’s dig into this quarter’s best and worst performers in the terrestrial telecommunication services industry, including Cogent (NASDAQ:CCOI) and its peers.
Terrestrial telecommunication companies face an uphill battle, as they mostly sell into a deflationary market, where the price of moving a bit tends to decrease over time with better technology. Without dependable volume growth, revenue growth could be challenged. Unfortunately, broadband penetration in their core US market is quite high already. On the other hand, data consumption from streaming entertainment and 5G expansion could provide a floor on growth for the next number of years. As if that wasn't enough to worry about, competition is intense, with larger telecom providers and hyperscalers expanding their own networks.
The 4 terrestrial telecommunication services stocks we track reported a satisfactory Q2. As a group, revenues were in line with analysts’ consensus estimates.
While some terrestrial telecommunication services stocks have fared somewhat better than others, they have collectively declined. On average, share prices are down 4.6% since the latest earnings results.
Cogent (NASDAQ:CCOI)
Operating a massive network spanning 20,000 miles of fiber optic cable and connecting to over 3,200 buildings worldwide, Cogent Communications (NASDAQ:CCOI) provides high-speed Internet access, private network services, and data center colocation to businesses and bandwidth-intensive organizations across 54 countries.
Cogent reported revenues of $246.2 million, down 5.5% year on year. This print fell short of analysts’ expectations by 0.7%, but it was still a very strong quarter for the company with EPS in line with analysts’ estimates.
Cogent delivered the weakest performance against analyst estimates and slowest revenue growth of the whole group. Unsurprisingly, the stock is down 18.1% since reporting and currently trades at $35.93.
Is now the time to buy Cogent? Access our full analysis of the earnings results here, it’s free.
Best Q2: Lumen (NYSE:LUMN)
With approximately 350,000 route miles of fiber optic cable spanning North America and the Asia Pacific, Lumen Technologies (NYSE:LUMN) operates a vast fiber optic network that provides communications, cloud connectivity, security, and IT solutions to businesses and consumers.
Lumen reported revenues of $3.09 billion, down 5.4% year on year, falling short of analysts’ expectations by 0.7%. However, the business still had a very strong quarter with EPS in line with analysts’ estimates.
Although it had a fine quarter compared its peers, the market seems unhappy with the results as the stock is down 3.9% since reporting. It currently trades at $4.30.
Is now the time to buy Lumen? Access our full analysis of the earnings results here, it’s free.
Weakest Q2: Telephone and Data Systems (NYSE:TDS)
Operating primarily through its majority-owned subsidiary UScellular and wholly-owned TDS Telecom, Telephone and Data Systems (NYSE:TDS) provides wireless, broadband, video, and voice communications services to 4.6 million wireless and 1.2 million broadband customers across the United States.
Telephone and Data Systems reported revenues of $1.19 billion, down 4.2% year on year, exceeding analysts’ expectations by 1.5%. Still, it was a softer quarter as it posted a significant miss of analysts’ EPS estimates.
The stock is flat since the results and currently trades at $38.81.
Read our full analysis of Telephone and Data Systems’s results here.
U.S. Cellular (NYSE:USM)
Operating as a majority-owned subsidiary of Telephone and Data Systems since its founding in 1983, US Cellular (NYSE:USM) is a regional wireless telecommunications provider serving 4.6 million customers across 21 states with mobile phone, internet, and IoT services.
U.S. Cellular reported revenues of $916 million, down 1.2% year on year. This print surpassed analysts’ expectations by 1.5%. Overall, it was a strong quarter as it also put up EPS in line with analysts’ estimates.
U.S. Cellular pulled off the biggest analyst estimates beat and fastest revenue growth among its peers. The stock is up 3.6% since reporting and currently trades at $77.01.
Read our full, actionable report on U.S. Cellular here, it’s free.
Market Update
In response to the Fed’s rate hikes in 2022 and 2023, inflation has been gradually trending down from its post-pandemic peak, trending closer to the Fed’s 2% target. Despite higher borrowing costs, the economy has avoided flashing recessionary signals. This is the much-desired soft landing that many investors hoped for. The recent rate cuts (0.5% in September and 0.25% in November 2024) have bolstered the stock market, making 2024 a strong year for equities. Donald Trump’s presidential win in November sparked additional market gains, sending indices to record highs in the days following his victory. However, debates continue over possible tariffs and corporate tax adjustments, raising questions about economic stability in 2025.
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