United States Cellular (USM) Up on Analyst Upgrade Despite Lower Earnings

Shares of Chicago, Illinois based United States Cellular Corporation (USM) rose strongly on Tuesday, against the backdrop of a sharply lower performance by Wall Street overall. US Cellular's stock was up 16.33%, rising $5.49 per share to close at 39.10, on volume of 630,626 shares. Despite lower second quarter net earnings, revenues exceeded analysts expectations, and the company stock was upgraded by at least one analyst.

Founded in 1983, US Cellular Corp. is a wireless telecommunications provider.
It is a subsidiary of Telephone and Data Systems, Inc. which owns, operates and invests in wireless markets throughout the United States. The company had a net income of $140.4 million on sales of $3.92 billion for 2013, and has about 6,000 employees and 4.9 million customers.

US Cellular rose on an upgrade of the stock by analysts at Raymond James, who raised the stock from "outperform" to "strong buy". The Raymond James analyst believes that the company has begun a turnaround and has raised its target price on the stock from $44 to $47. It is believed that US Cellular will monetize its non-core towers in the second half as well as others in its core market. Any weakness is seen as a buying opportunity.

On Friday the company the company released its operating results for the second quarter of 2014. Total operating revenues came in at $957.8 million, versus $995.1 million for the second quarter of 2013. Net income came in at -$18.8 million, or -.22 cents a share, compared to net income of $143.4 million, or $1.69 per share for the second quarter of 2013.

Supporting Tuesdays strong stock performance is the fact that while the net loss was larger than expected, revenues were higher, lending support to the belief that US Cellular may have hit bottom and is now on its way back. For the full year 2014 the company currently projects income before income taxes to come in at between $350 million and $450 million.

"We have continued to generate strong gross additions and reduce churn, which led to net postpaid customer growth for the month of June, and that has continued into July," said Kenneth R. Meyers , U.S. Cellular president and CEO. "We are building momentum from strategic actions we've taken to attract more new customers and increase loyalty...More wireless consumers are responding to our strong value proposition that offers the speed and quality of our award-winning network, together with a wide range of devices and data services, and competitive pricing...With smartphone penetration at 55 percent among postpaid customers, data use continues to grow, driving up our postpaid average revenue per user."

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Published on Aug 6, 2014
By Kevin Mercadante

Copyrighted 2020. Content published with author's permission.

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