The overall Technology sector, of which Telecom is an essential part, is likely to have recorded relatively healthy earnings in the October-December quarter compared with other sectors. Despite the COVID-19-induced supply chain disruptions affecting normal business operations of several telecom firms, the sector appears to have been well placed with recurring revenues backed by digital sustainability. Better-than-expected sector revenues with a faster pace of 5G deployment and rapid proliferation of IoT devices amid rising work-from-home trend instill confidence.

Although the sector appears to have overcome the ‘supply shock’ caused by factory shutdowns and travel restrictions through gradual resumption of business activities, profitability has largely been compromised. Various trade restrictions on grounds of national security concerns have eroded sector margins, while higher infrastructure investments for 5G networks have increased operating costs. Upfront capital investments for 5G have proven to be substantially higher than prior generations of wireless deployments due to network density requirements, potentially hurting return of capital metrics.

To sum up, although technological advances have changed the way consumers communicate resulting in higher home data consumption and video streaming, intense competition and commoditization of services have limited the chances of benefiting from these trends.

Per the latest

Earnings Preview

, total earnings for the Technology sector for the December quarter are expected to be up 19.8% on 14.4% higher revenues year over year compared with the respective tallies of 12.9% and 8.4% in the prior quarter.

Let’s take a look at four leading Telecom stocks that are slated to report fourth-quarter results on Feb 18.

Arista Networks, Inc.


ANET

is scheduled to report results after the closing bell. For the December quarter, the Zacks Consensus Estimate for revenues is pegged at $629 million, indicating a 13.5% increase from the year-ago quarter’s reported figure. Adjusted earnings per share are pegged at $2.40, which suggests an improvement from $2.29 recorded in the year-earlier quarter.

Our proven model predicts an earnings beat for Arista this time around. The combination of a positive

Earnings ESP

and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is perfectly the case here.

Arista currently has an Earnings ESP of +2.01% and a Zacks Rank #3.

You can uncover the best stocks to buy or sell before they’re reported with our

Earnings ESP Filter

.

During the fourth quarter, Arista introduced next-gen unified edge solutions to its Cognitive Campus portfolio for implementing automated traffic visibility in the campus for a seamless client-to-cloud environment. It capitalizes on EOS – an advanced network operating system – and CloudVision – a network management platform – to simplify visualization of workloads and secure campus networks. Such innovative product launches are

likely to have translated into top-line growth in the fourth quarter

.

InterDigital, Inc.


IDCC

is scheduled to report results before the opening bell. The consensus mark for revenues is pegged at $88 million, which suggests a decline from $102 million in the year-ago quarter’s reported figure. The Zacks Consensus Estimate is pegged at a loss of 3 cents per share. The figure indicates a significant deterioration from the year-ago quarter’s reported earnings of 44 cents per share.

InterDigital currently has an Earnings ESP of 0.00% and a Zacks Rank #3.

You can see


the complete list of today’s Zacks #1 Rank stocks here


.

United States Cellular Corporation


USM

is slated to report results after the closing bell. The consensus mark for revenues is pegged at $1,058 million, which suggests a slight improvement from $1,052 million in the year-ago quarter’s reported figure. The Zacks Consensus Estimate is pegged at 5 cents per share. The figure indicates a significant deterioration from the year-ago quarter’s reported earnings of 20 cents per share.

United States Cellular currently has an Earnings ESP of +342.11% and a Zacks Rank #1.

EchoStar Corporation


SATS

is scheduled to report results before the opening bell. The consensus mark for revenues is pegged at $478 million, which suggests a decline from $499 million in the year-ago quarter’s reported figure. The Zacks Consensus Estimate is pegged at breakeven. The figure indicates a significant improvement from the year-ago quarter’s loss of 48 cents per share.

EchoStar currently has an Earnings ESP of 0.00% and a Zacks Rank #3.

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