Telephone And Data Systems (TDS): Q3 Earnings Preview

Telephone and Data Systems Inc. (NYSE:TDS) , a leading provider of telecommunications services, is slated to report third-quarter 2016 results on Nov 4, before the opening bell.

Last quarter, the company posted a positive earnings surprise of 25.00%. Moreover, the company’s earnings surpassed the Zacks Consensus Estimate in three of the previous four quarters, with an average beat of 230.27%. Let’s see how things are shaping up for this announcement.

Factors at Play

Telephone & Data Systems is striving to expand its business in the managed hosting and cloud service market through a new cloud-based storage service and managed IP connections. The company’s wireless business recorded strong results owing to increased handset offerings, shared data plans for consumers and businesses, equipment financing and expansion of the LTE technology. Telephone and Data Systems’ flexible cash position and liquidity open up scope for investments.

However, intense competition and roaming revenue-related woes raise concern. Additionally, high costs associated with network integration and construction of new cell sites, aggressive equipment pricing, increasing capacity in existing cell sites, wireless technology upgrades and spectrum licensing are likely to strain the company’s finances.

Earnings Whispers

Our proven model does not conclusively show that Telephone and Data Systems is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here as elaborated below.

Zacks ESP: Telephone and Data Systems has an earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 13 cents. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

Zacks Rank: Telephone and Data Systems has a Zacks Rank #3 which increases the predictive power of ESP. However, the company’s 0.00% ESP makes surprise prediction difficult.

Meanwhile,we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stocks to Consider

Here are some companies that have the right combination of elements to post an earnings beat this quarter.

International Business Machines Corporation (NYSE:IBM) , with an earnings ESP of +0.20% and a Zacks Rank #3.The company’s earnings surpassed the Zacks Consensus Estimate in all of the previous four quarters.

Verizon Communications Inc. (NYSE:VZ) , with an earnings ESP of +1.11% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here. The company’s earnings beat the Zacks Consensus Estimate in three of the previous four quarters.

Microsoft Corporation (NASDAQ:MSFT) , with an earnings ESP of +1.30% and a Zacks Rank #3.The company’s earnings surpassed the Zacks Consensus Estimate in three of the previous four quarters.

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