What Awaits Telephone & Data Systems (TDS) Q1 Earnings?

Telephone & Data Systems Inc. (NYSE:TDS) is slated to release its first-quarter 2016 results on May 6, before the market opens.

Last quarter, Telephone and Data Systems delivered an impressive positive earnings surprise of 79.41%. Moreover, the company’s bottom line has surpassed the Zacks Consensus Estimate in three of the past four quarters, with an average beat of a huge 652.52%. Let’s see how things are shaping up for this announcement.

Factors Likely to Influence this Quarter

Telephone and Data Systems is experiencing strong smartphone demand at its wireless wing – United States Cellular Corporation (NYSE:USM) . Of the total smartphone sales, nearly 94% are 4G devices. Higher ARPU from smartphone users and full utilization of LTE network capacity on the back of customer migration from 3G to 4G networks are expected to mitigate operating cost headwinds arising from higher subsidies on smartphones.

The company is also doing well on the inorganic front. OneNeck(R) IT Solutions LLC, a wholly owned subsidiary of Telephone and Data Systems, is currently one of the fastest growing IT Solution companies in North America, according to the CRN’s Fast Growth 150 list. It has built a $20 million Tier 3 data center in Denver and expanded two additional Tier 3 infrastructures in the Midwest. The subsidiary also announced OneNeck Connect – a plan that provides a 1 Gbps pipe into the company's Tier 3+ data center in Denver, CO.

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 Zacks Consensus Estimate and the Most Accurate estimate are pegged at 14 cents.

Zacks Rank:Telephone and Data Systems has a Zacks Rank #3, which increases the predictive power of ESP. However, we need to have a positive ESP to be confident of an earnings surprise.

Stock to Consider

Here are some companies you may want to consider as our model shows these have the right combination of elements to post an earnings beat this quarter:

Agilent Technologies, Inc. (NYSE:A) has an Earnings ESP of +2.56% and a Zacks Rank #2.

ACI Worldwide, Inc. (NASDAQ:ACIW) has an Earnings ESP of +12.5% and a Zacks Rank #3.