Daily Management Review

Top 3 global telecom companies with growth potential


02/21/2019


Hopes for a possible trade deal between the United States and China, as well as strong financial performance of companies in the fourth quarter, led to an influx of money into the industrial goods and basic materials sectors in the first six weeks of 2019.



Mike Mozart
Mike Mozart
During the same period, shares of telecommunications firms with high dividends fell behind the market, as more and more investors began to give preference to investing in growth.

However, if analysts cut revenue growth forecasts for the coming quarters, the telecommunications sector will have the opportunity to become leaders again. Investors may return to proven American companies that can protect them from the effects of a slowdown in the global economy and trade tensions. According to FactSet, analysts expect profits of the S&P 500 companies with a focus on the US to grow more than three times faster than their competitors with an international orientation.

Below we describe the three companies that are worth attention to in connection with the current situation on the market.

1. AT&T

AT&T is an American multinational telecommunications conglomerate headquartered in Dallas, Texas. It is the world's largest telecommunications company and one of the largest media conglomerates; a leading provider of both local and long-distance telephone service in the United States, as well as the second largest cellular operator in the United States. The company operates in the following areas: Business Solutions, Entertainment Group, Consumer Mobility and International.

AT&T’s business services sector, which provides fixed and wireless communications to companies, government organizations, and wholesale customers around the world, generates about 40% of revenue, while about 30% of sales are in the entertainment technology segment. The company launched its long-awaited 5G mobile network in 12 US cities in December 2018 and plans to launch Samsung 5G phones in early 2019.

P/E of the company's shares is 10.7, which is slightly lower than the industry average of 11. With a market capitalization of $ 221.88 billion and a dividend yield of 6.85%, AT&T securities rose by 8.55% year on year, 2.41% less than the S&P 500 over the same period as of February 18.

2. VERIZON COMMUNICATIONS

With a market capitalization of $ 227.92 billion, Verizon is one of the largest telecommunications companies in the US and the world, providing fixed and mobile services in the US market, Internet access and other services. The company receives about 70% of the revenue from its mobile business. Although the telecommunications conglomerate did not meet expectations for revenue in the fourth quarter, the number of new subscribers turned out to be twice as high as analysts expected. This year, Verizon plans to increase spending due to the launch of 5G wireless technology. From the beginning of the current year and as of February 18, the yield on the company's shares was -0.81%. Dividend yield is 4.46%.

3. CENTURYLINK

Headquarters of the corporation is located in Monroe, Louisiana. CenturyLink provides a wide range of communication services, primarily for customers in the United States. Acquisition of Level 3 Communications in 2017 in the amount of $ 34.6 billion allowed the firm to attract more business customers, which now account for about 75% of revenue.

The company’s shares reached a 22-year low on Thursday, February 14, after it reduced its dividend by more than half to focus on debt payments. CenturyLink, with a market capitalization of $ 14.85 billion, fell by almost 10% year-on-year as of February 18.

The company didn’t bring much joy to its shareholders, since over the past five months the papers have fallen by more than 30%. Nevertheless, the “inverted hammer” figure appeared on the CenturyLink graph recently, which is a forerunner of the uptrend, in connection with which last week on Friday the company's shares rose by more than 7%. The discrepancy between price and relative strength index (RSI) also implies a weakening of the domination of the “bear” in relation to the securities of the company.

source: bloomberg.com






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