The communication industry is evolving significantly, driven by the growing demand for 5G technology and the need for high-speed, low-latency networks. The ongoing expansion of 5G, alongside the anticipation of 6G deployment and harnessing artificial intelligence (AI) to revolutionize operations and customer experiences, are fueling substantial growth within the industry.
Amid this backdrop, investors could consider buying fundamentally sound communication stocks T-Mobile US, Inc. (TMUS), Comcast Corporation (CMCSA), and InterDigital, Inc. (IDCC), which have their third quarter earnings just ahead of them. Moreover, these stocks have a solid history of earnings surprises.
The telecommunications industry is experiencing remarkable growth, driven by widespread wireless network adoption and substantial investments in infrastructure. Industries are experiencing boosted efficiency and productivity as they start to adopt 5G networks in their workspace.
According to a PwC report, the U.S. economy is expected to add $15 billion by using 5G applications in industrial manufacturing by 2030. This expansion of 5G technology and the anticipation of 6G innovations are elevating communication capabilities, particularly benefiting the United States as a leader in digital advancements.
Moreover, AI is transforming the telecommunications sector by enhancing operational efficiency and customer experiences and managing data center demands. This integration of AI presents a lucrative investment opportunity, with the global AI in telecommunications market projected to reach $21.20 billion by 2030, growing at a CAGR of 40.4%.
Further, according to a report by Mordor Intelligence, the U.S. telecom market is forecasted to grow to $530.61 billion by 2029, reflecting a steady CAGR of 3.7%. This growth reflects the ongoing transformation and expansion of the industry.
Considering these trends, let us discuss the fundamentals of three top-rated communication stocks that could pop off after their soon-to-be-announced third-quarter earnings.
Stock #3: T-Mobile US, Inc. (TMUS)
TMUS provides mobile communication services, including voice, messaging, and data, through its T-Mobile and Metro by T-Mobile brands. It utilizes its 4G LTE and 5G networks to deliver these services. Additionally, the company offers a variety of wireless devices and accessories, along with financing options via equipment installment plans (EIP).
On October 8, TMUS announced the introduction of 5G On Demand, a complete, portable 5G private network and services solution that includes setup, teardown and network management.
With the introduction of new advancements that fuel the 5G revolution, TMUS is securing a top spot in the communications industry, catering to the growing needs of its customers.
On September 18, TMUS and Open AI entered a multi-year agreement to customize the first intent-driven AI-decisioning platform, IntentCX. This platform will use real-time data to understand customers’ needs and intent, proactively take action and resolve issues, and improve TMUS’ customer service and interactions, gathering the company a loyal following in the days to come.
In the fiscal 2024 second quarter that ended June 30, 2024, TMUS’ total services revenues rose 4.4% year-over-year to $16.43 billion. Its adjusted EBITDA stood at $8.05 billion, up 8.8% from the year-ago quarter. Plus, the company’s net income and EPS increased 31.7% and 33.9% from the prior year’s period to $2.93 billion and $2.49, respectively.
TMUS is expected to release its fiscal 2024 third-quarter results on October 23, 2024. Street expects TMUS’ revenue and EPS for the fiscal third quarter (ended September 2024) to increase 4% and 22.5% year-over-year to $20.02 billion and $2.45, respectively. Moreover, the company surpassed the consensus EPS estimates in three of the trailing four quarters.
TMUS’ stock has gained 20.3% over the past three months and 52.4% over the past year to close the last trading session at $215.91.
TMUS’ bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
TMUS has a B grade for Growth, Stability, Sentiment, and Quality. It is ranked #4 in the 19-stock Telecom – Domestic industry.
Beyond what we stated above, we have also given TMUS grades for Value and Momentum. Get all the TMUS ratings here.
Stock #2: Comcast Corporation (CMCSA)
CMCSA is a global media and technology company that offers broadband, wireless, video, entertainment, sports, and news through brands like NBC, Telemundo, Universal, Peacock, and Sky. It operates through two segments: Connectivity & Platforms and Content & Experiences.
On September 25, CMCSA announced a joint partnership with Broadcom Inc. (AVGO) and Charter Communications to jointly develop Unified DOCSIS chipsets for network nodes, smart amps, and cable modems and to deliver upwards of 25 Gbps speeds over existing networks.
With rising demands for high-speed networks for businesses, CMCSA’s new venture would give the company a significant market presence and establish it as one of the top players in the communications industry.
On September 23, CMCSA unveiled Janus, an initiative that leverages leading-edge cloud and AI/ML technology to transform the way its core network delivers next-generation internet experiences to its customers. The new initiative is expected to maximize the company’s network performance and serve its customers with unprecedented internet experience, uplifting the company’s popularity as well.
For the fiscal 2024 second quarter that ended June 30, 2024, CMCSA’s revenue came in at $29.69 billion. The company’s adjusted EBITDA was reported to be $10.17 billion. Moreover, its adjusted net income increased marginally from its year-ago value to $4.74 billion, while its adjusted EPS rose 7% year-over-year to $1.21.
CMCSA is expected to announce its fiscal 2024 third-quarter results on October 31, 2024. Looking forward, analysts expect CMCSA’s revenue and EPS for the fiscal year ending December 2024 to increase 1.1% and 6% year-over-year to $122.93 billion and $4.22, respectively. Plus, the company surpassed the consensus EPS estimates in all four trailing quarters, which is impressive.
Over the past month, CMCSA’s stock has surged 6.1% to close the last trading session at $41.97.
CMCSA’s POWR Ratings reflect its optimistic outlook. It has an overall rating of B, equating to Buy in our proprietary rating system.
CMCSA has a B grade for Stability and Quality. It has topped the 8-stock Entertainment – TV & Internet Providers industry.
Click here to see CMCSA’s Growth, Momentum, Value, and Sentiment ratings.
Stock #1: InterDigital, Inc. (IDCC)
IDCC is a global research and development company focusing on wireless, video, and artificial intelligence (AI) technologies. The company designs and develops foundational technologies for connected experiences in various communications and entertainment products.
On October 1, IPCC announced a new patent license agreement with TPV, a major manufacturer of a range of digital TVs under various brands. Through this agreement, TPV has acquired the license to include IDCC’s extensive portfolio of HEVC patents as well as DTV patents licensed through IDCC's joint licensing program with Sony.
For the fiscal second quarter that ended June 30, 2024, IDCC’s revenues grew by 120% year-over-year to $223.49 million. Income from operations increased 472.8% from the year-ago value to $133.91 million. Also, the company’s adjusted EBITDA rose 194.5% from the prior-year quarter to $157.74 million.
Furthermore, the company’s non-GAAP net income and non-GAAP EPS grew 233.7% and 251.5% from the previous year’s period to $118.90 million and $4.57, respectively.
The consensus revenue estimate of $716.69 million for the fiscal year ending December 2024 reflects a rise of 30.4% year-over-year. Its EPS for the same period is expected to increase 13.6% from the prior year to $10.48. Furthermore, the company topped the consensus revenue and EPS estimates in each of the four trailing quarters, which is noteworthy.
IDCC’s stock has gained 28.8% over the past three months and 94.6% over the past year to close the last trading session at $155.86.
IDCC’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, translating to Buy in our proprietary rating system.
Beyond what we’ve stated above, we have also rated the stock for Growth, Momentum, Stability, and Sentiment. Get all IDCC ratings here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
TMUS shares rose $0.84 (+0.39%) in premarket trading Tuesday. Year-to-date, TMUS has gained 36.16%, versus a 24.09% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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