雅虎香港財經 US Cellular (USM) Soars 231% in a Year: Will the Trend Last?
Shares of United States Cellular Corporation USM have surged 231% over the past year, backed by healthy traction in the wireless business. The uptrend was further aided by a definitive agreement inked with T-Mobile US Inc. TMUS in May 2024 to sell substantially all of U.S. Cellular’s wireless operations along with 30% of its spectrum assets across several spectrum bands.
Earnings estimates for the current and next fiscal have increased 20.8% and 62.9%, respectively, since June 2024, implying robust inherent growth potential. With healthy fundamentals, this Zacks Rank #3 (Hold) stock appears primed for further appreciation. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Growth Drivers
Headquartered in Chicago, IL, U.S. Cellular is the fourth largest full-service wireless carrier in the United States. The company provides a range of wireless products and services, and a high-quality network to increase the competitiveness of local businesses and improve the efficiency of government operations. It is a subsidiary of Telephone and Data Systems, Inc., a diversified telecom service provider offering wireless and wireline services.
T-Mobile will pay an aggregate of $4.4 billion to U.S. Cellular, including a combination of cash and up to approximately $2 billion of assumed debt. The transaction is likely to close midway next year, subject to the fulfillment of mandatory closing conditions and other regulatory approvals. Telephone and Data Systems, which boasts about 83% ownership stake in U.S. Cellular, has unanimously agreed to the deal to help unlock significant value for its wireless customers and shareholders.
Post the deal closure and successful integration, millions of U.S. Cellular customers, particularly in the underserved rural areas, are likely to get seamless access to superior connectivity and nationwide coverage of one the largest and fastest 5G networks of T-Mobile. In addition, U.S. Cellular customers will have the opportunity to enjoy T-Mobile’s industry-leading value-packed plans filled with benefits and perks such as streaming and free international data roaming along with best-in-class customer support without any switching costs.
The divesture will enable U.S. Cellular to improve its liquidity and reduce its debt burden, with an option to opportunistically monetize the retained 70% of total spectrum assets. Moreover, the company 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.
U.S. Cellular’s top line is benefiting from solid user engagement in its fixed wireless business and improvement in tower rental revenues. The geographical diversity and well-balanced presence across various major wireless carriers highlight the robustness of its tower rental portfolio. Management's efforts to enhance operational efficiency and drive cost optimization across its operations have significantly boosted profitability despite a very challenging competitive environment.
The company’s strategy to launch flat rate plans is enabling it to successfully navigate through the fierce competition in the U.S. wireless industry. These pricing plans are gaining considerable popularity among postpaid customers.
Key Picks
Arista Networks, Inc. ANET, sporting a Zacks Rank #1 at present, is likely to benefit from strong momentum and diversification across its top verticals and product lines. The company has a software-driven, data-centric approach to help customers build their cloud architecture and enhance their cloud experience. Arista has a long-term earnings growth expectation of 15.7% and delivered an earnings surprise of 15.4%, on average, in the trailing four quarters.
It holds a leadership position in 100-gigabit Ethernet switching share in port for the high-speed data center segment. Arista is increasingly gaining market traction in 200 and 400-gig high-performance switching products and remains well-positioned for healthy growth in data-driven cloud networking business with proactive platforms and predictive operations.
Motorola Solutions, Inc. MSI, carrying a Zacks Rank #2 (Buy) at present, delivered an earnings surprise of 7.5%, on average, in the trailing four quarters. It has a long-term earnings growth expectation of 9.5%.
Motorola provides services and solutions to government segments and public safety programs, along with large enterprises and wireless infrastructure service providers. It develops and services both analog and digital two-way radio, voice and data communications products, and systems for private networks, wireless broadband systems and end-to-end enterprise mobility solutions to a wide range of enterprise markets.
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