The telecom industry has been growing rapidly over the past few years, driven by the global 5G race and increased demand for personal broadband. Substantial government support and a nationwide 5G rollout should shape the telecom sector’s growth over the long term.
The $1.2 trillion Infrastructure Investment and Jobs Act passed last year has earmarked $65 billion for nationwide broadband adoption, boosting the domestic telecom sector. In addition, as countries worldwide roll out 5G services, the telecom industry is expected to grow at a 6% CAGR over the next three years to $3461.03 billion by 2025. According to a Market Research report, the global 5G service market is currently worth more than $21.53 billion and is expected to reach approximately $85.84 billion by the end of 2023.
Lumen Technologies, Inc. (LUMN)
LUMN in Monroe, La., is a facilities-based technology and communications company that delivers integrated communications to residential and business customers in the U.S. and internationally. It operates through five segments: International and Global Accounts Management; Enterprise; Small and Medium Business; Wholesale; and Consumer.
This month, LUMN secured a task order worth more than $1.2 billion from the U.S. Department of Agriculture (USDA) to deliver network services to more than 9,500 USDA locations across the U.S. and abroad. Its receipt of the order reflects LUMN’s leading market position in the U.S. telecom industry.
Last December, LUMN received an order from the U.S. Army Reserve Command (USARC) to deliver Virtual Private Network (VPN) services to more than 650 USARC locations across the U.S. The 11-year contract worth $23 million is expected to boost LUMN’s revenue over the long term.
LUMN’s free cash flow increased 29% year-over-year to $1.04 billion in its fiscal third quarter, ended Sept. 30, 2021. LUMN’s net income grew 48.6% year-over-year to $544 million. And the company’s net income per common share increased 50% from its year-ago value to $0.51.
LUMN is relatively undervalued compared to its peers. In terms of forward non-GAAP P/E, LUMN is currently trading at 6.23x, which is 63.9% lower than the 17.29x industry average. Its 0.62 forward Price/Sales multiple is 62.2% lower than the 1.65x industry average. And its 1.94 and 4.97 respective forward Price/Cash Flow and EV/EBITDA ratios compare with 9.81 and 9.23 industry averages.
The company also has an impressive growth history. LUMN’s EBIT has risen at a 6.9% CAGR over the past three years.
The $0.54 consensus EPS estimate for its fiscal fourth quarter, ended December 2021, represents 12.3% year-over-year growth. Also, LUMN has an impressive earnings surprise history; it surpassed the consensus EPS estimates in each of all the trailing four quarters.
The stock gained marginally over the past three months to close yesterday’s trading session at $11.88.
LUMN’s POWR Ratings reflect this promising outlook. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
LUMN has a B grade for Value and Growth. Within the Telecom – Domestic industry, it is ranked #3 of 19 stocks. To see additional POWR Ratings (Momentum, Stability, Quality, and Sentiment) for LUMN, click here.
KT Corporation (KT)
KT in Seongnam, South Korea, is a telecommunications company that offers integrated telecommunications and platform services in Korea and internationally. It provides services that include fixed-line telephone, broadband Internet access, media and content, IT and network, and more.
This month, KT launched its new maritime brand XWAVE, targeting the Southeast Asian market. The move is expected to boost KT’s business growth by extending its global footprint. KT has the potential to grow 27.5% annually through this expansion.
Last December, KT made a $5 million equity investment in NeuroSigma Inc. The investment follows the companies’ digital health partnership in June 2021. Regarding this, KT’s Senior Executive Vice President Jae-ho Song said, “Through this investment, we will seek mutual growth of the two companies and support the Monarch eTNS System’s commercialization, development of additional digital therapeutic indications, and acceleration of NeuroSigma’s business growth trajectory.”
In its fiscal 2021 third quarter, ended September 30, KT’s operating revenue increased 3.6% year-over-year to KRW6,217.4 billion ($5.16 billion). Its operating income increased 30.0% year-over-year to KRW382.4 billion ($317.61 million). The company’s net income rose 46.9% from the same period last year to KRW337.7 billion ($280.48 million), while its EBITDA increased 6.5% from its year-ago value to KRW1,277.5 billion ($1.06 billion).
KT is trading at a discount to its peers. In terms of forward EV/Sales, it is currently trading at 0.72x, which is 69.9% lower than the 2.40x industry average. Its 0.40 forward Price/Sales multiple is 76.1% lower than the 1.65x industry average.
The company’s financials have grown substantially over the past three years. KT’s revenues have risen at a 24.5% CAGR over the past three years. And its EPS has grown at a 25.6% CAGR, while its levered free cash flow has improved at a 122.7% CAGR over the past three years.
Analysts expect KT’s revenue for its fiscal year 2022 to be $16.03 billion, representing a 3.4% rise year-over-year. The Street expects the company’s EPS for fiscal 2022 to come in at $1.63, representing a 5.1% increase year-over-year.
Shares of KT have increased 18% in price over the past year and closed yesterday’s trading session at $12.70.
KT has an overall A rating, which translates to Strong Buy in our POWR Ratings system. It has an A grade for Value and B for Growth, Stability, and Sentiment. It is ranked #4 of 49 stocks in the A-rated Telecom – Foreign industry.
Click here to see KT ratings for Momentum and Quality.
VEON Ltd. (VEON)
VEON is a Dutch multinational telecommunication services company. It provides mobile and fixed-line telecommunication services. It operates in the regions of Asia, Africa, and Europe. VEON is headquartered in Amsterdam, the Netherlands.
Last month, VEON partnered with Moscow-based Yandex to launch its first joint tariff plan. The company is expected to realize profits from this joint venture. VEON also announced bank financing of RUB 90 billion (approximately $1.16 billion). The proceeds are expected to fund its general corporate expenses.
In its fiscal 2021 third quarter, ended September 30, VEON’s total revenues increased 10.2% year-over-year to $2.01 billion. VEON’s EBITDA increased 8.6% year-over-year to $889 million. The company’s profit for the period rose 130.2% from the same period last year to $195 million.
In terms of forward non-GAAP P/E, VEON is currently trading at 4.87x, which is 71.9% lower than the 17.29x industry average. Its 0.29 forward Price/Sales multiple is 82.4% lower than the 1.65x industry average. VEON’s 3.38 forward EV/EBITDA ratio compares with the 9.23 industry average.
VEON’s EBIT and net income have risen at CAGRs of 3.7% and 13.3%, respectively, over the past three years.
The $2.04 billion consensus revenue estimate for its fiscal fourth quarter, ended December 31,2021, represents 2.2% year-over-year growth. The $0.12 consensus EPS estimate for the current quarter indicates 500% year-over-year growth.
Shares of VEON surged 3.8% in price intraday to close yesterday’s trading session at $1.38.
VEON has an overall A rating, which translates to a Strong Buy in our POWR Ratings system. It has an A grade for Value and a B grade for Growth, Stability, and Quality. It is ranked #5 of 49 stocks in the Telecom – Foreign industry.
Click here to see VEON ratings for Momentum and Sentiment.
InterDigital, Inc. (IDCC)
IDCC is a technology research and development company. The Wilmington, Del.-based concern designs and develops technologies in the U.S. and internationally. The company offers technology solutions for mobile devices, wireless products, and networks.
Earlier this month, IDCC extended its business partnership and renewed its patent license with Sony Corporation of America. The extended partnership should strengthen IDCC’s portfolio of assets in wireless technologies and boost the revenue stream.
IDCC’s total revenue increased 64% year-over-year to $143.50 million in its fiscal third quarter ended September 30, 2021. IDCC’s net income grew 15.1% year-over-year to $25.21 million. And the company’s net income per common share increased 9.2% from its year-ago value to $0.83.
IDCC is relatively undervalued compared to its peers. In terms of forward non-GAAP P/E, IDCC is currently trading at 22.29x, which is marginally lower than the 22.31x industry average. And its 11.37 forward EV/EBITDA multiple is 21.8% lower than the 14.53x industry average.
The $101.45 million consensus revenue estimate for its fiscal fourth quarter, ended December 2021, represents11.7% year-over-year growth. The $0.68 consensus EPS estimate for the current quarter indicates 106.1% year-over-year growth. Also, IDCC has an impressive earnings surprise history; it surpassed the consensus EPS estimates in each of all the trailing four quarters.
Over the past six months, shares of IDCC have increased marginally in price and closed yesterday’s trading session at $65.74.
IDCC has an overall B rating, which translates to Buy in our proprietary rating system. The stock also has an A grade for Growth and a B grade for Value and Sentiment. Within the Telecom – Domestic industry, it is ranked #1 of 19 stocks.
To see additional POWR Ratings (Momentum, Stability, and Quality) for IDCC, click here.
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LUMN shares were trading at $11.87 per share on Friday morning, down $0.01 (-0.08%). Year-to-date, LUMN has declined -5.42%, versus a -9.72% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions. More...
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|KT||Get Rating||Get Rating||Get Rating|
|VEON||Get Rating||Get Rating||Get Rating|
|IDCC||Get Rating||Get Rating||Get Rating|