Shares of United States Cellular Corporation (USM – Free Report) have climbed 54.6% in the past year compared with a growth of 27.7% for the industry. Solid traction in fixed wireless portfolio and tower rental business are key growth drivers. Management’s focus on cost optimization is driving profitability. Backed by strong fundamentals, this Zacks Rank #3 (Hold) stock appears primed for further appreciation.
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Growth Drivers
U.S. Cellular has taken concrete steps to accelerate subscriber additions and improve churn management. The company aims to offer the best wireless experience to customers by providing superior quality network and national coverage. The company’s improvised strategy to launch flat rate plans is enabling it to successfully navigate the fierce competition in the U.S. wireless industry. The wireless carrier is expanding its footprint while adopting unlimited plans to enhance average revenue per user. While 5G and network modernization programs are on track, the company is optimistic about the use of the millimeter wave spectrum for fixed wireless access and its potential to serve rural customers.
Its top line is benefiting from solid user engagement in its fixed wireless business and a steady improvement in tower rental revenues. In the third quarter, fixed wireless customers grew 32% year over year to 140,000. The geographical diversity and well-balanced presence across various major wireless carriers highlight the robustness of its tower rental portfolio.
USM is taking several initiatives to reduce its debt burden, improve liquidity and accelerate investments in network advancements. The company is monetizing its spectrum holdings. It has inked a definitive agreement with T-Mobile to sell substantially all of its wireless operations, along with 30% of its spectrum assets across several spectrum bands. TMUS will pay an aggregate of $4.4 billion, including a combination of cash and approximately $2 billion of assumed debt. Moreover, USM will enjoy a steady revenue stream with T-Mobile as its anchor tenant on a minimum of 2,015 incremental towers for 15 years in addition to approximately 600 towers where it already serves as a tenant. The company also inked a definitive agreement with Verizon Communication to divest a portion of its spectrum holdings for $1 billion.
USM’s quick ratio has improved to 1.39 in 2024 from 1.33 in 2023, while the current ratio improved to 1.57 from 1.55 during the same period. This suggests that the company is well-positioned to meet its short-term debt obligations.
USM delivered an earnings surprise of 40.45%, on average, in the trailing four quarters. The company has an average brokerage recommendation (ABR) of 1.33 on a scale of 1 to 5 (Strong Buy to Strong Sell). ABR is the calculated average of actual recommendations made by brokerage firms and portends the future potential of the stock.
Key Picks
Keysight Technologies, Inc. (KEYS – Free Report) sports a Zacks Rank of 1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
In the last reported quarter, it delivered an earnings surprise of 5.10%. Keysight is expected to benefit from the growing proliferation of electronic content in vehicles, momentum in space and satellite applications and rising adoption of driver-assistance systems globally.
InterDigital (IDCC – Free Report) sports a Zacks Rank #1 at present. In the last reported quarter, it delivered an earnings surprise of 114.47%.
It is a pioneer in advanced mobile technologies that enable wireless communications and capabilities. The company designs and develops a wide range of advanced technology solutions used in digital cellular, wireless 3G, 4G and IEEE 802-related products and networks.
Ubiquiti Inc. (UI – Free Report) sports a Zacks Rank #1 at present. In the last reported quarter, Ubiquiti delivered an earnings surprise of 20.9%. Its highly flexible global business model remains apt to adapt to the changing market dynamics to overcome challenges while maximizing growth.
The company’s effective management of its strong global network of more than 100 distributors and master resellers improved its visibility for future demand and inventory management techniques.
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