BofA focuses on three key shares heading into telecom’s third quarter earnings (NYSE:VZ)

Waiting for third-quarter outcomes amongst telecoms and telecom companies, BofA is specializing in its highest-conviction impressions and the areas the place it departs most from Wall Avenue consensus.

That applies to its impressions on the large three wi-fi carriers, analyst David Barden notes, highlighting the largest deltas in his estimates.

On AT&T (NYSE:T), Avenue consensus on postpaid cellphone internet additions is simply too low, he says, since AT&T will profit from a bigger pool of service switchers and promotional exercise. He estimates that determine to return in at 687,000, vs. consensus for 582,000 (and even that is being pulled down by a “extremely unlikely” low-end estimate for 130,000, he says).

On the flip aspect, the Avenue might be too excessive with its estimate for T-Cell’s (TMUS) core adjusted earnings earlier than curiosity, taxes, depreciation and amortization, he notes, forecasting that determine to return in at $6.5B vs. a consensus for $6.7B.

There, web site decommissioning will considerably wrap up in Q3, he says. The corporate ended Q2 with “two-thirds of its 35,000 web site decommissioning goal achieved with the remaining third anticipated to be considerably full in 3Q.” The excessive consensus for T-Cell (TMUS) might not absolutely account for “the iPhone launch throughout the quarter, VZ’s elevated promotional exercise, and the timing of decommissioning advantages weighted to 4Q,” Barden says.

And on Verizon (NYSE:VZ), Barden thinks Avenue expectations for client postpaid churn are too low.

“After elevating costs on the finish of final quarter, VZ has flagged its expectation for briefly elevated client postpaid cellphone churn in 3Q22. The churn bubble is barely anticipated to impression 3Q,” Barden writes.

However he expects the bubble to push churn as much as 0.89% in Q3, vs. consensus for 0.84%. Churn falling will assist raise reported internet provides within the necessary vacation fourth quarter, nevertheless.

Verizon (VZ) is one in every of his key shares to observe as outcomes roll in, with its management hole narrowing. Together with mushy internet provides because of the elevated churn, he expects the corporate will present progress rising common income per account and gross provides, because of new promotions and plans, “however its problem is constructing momentum and transferring from postpaid cellphone internet losses to optimistic internet additions.”

He is staying Impartial on the inventory, anticipating long-term steering cuts will come within the first quarter of 2023. Verizon (VZ) reviews earnings earlier than the market opens subsequent Thursday, Oct. 21.

One other key inventory to observe is Lumen Applied sciences (NYSE:LUMN), the place eyes are on new administration’s subsequent steps (Kate Johnson was named as the brand new CEO on Sept. 13, and the corporate obtained a brand new chief monetary officer in April).

“We perceive the workforce’s priorities … are to (1) put money into development, and (2) handle leverage,” Barden says, including “We proceed to imagine a dividend lower is inevitable within the close to future. Equally as inevitable would be the swift damaging response of the income-centric retail cash which represents the overwhelming majority of the shareholder base.”

BofA’s different key inventory to observe within the sector is Crown Fortress (NYSE:CCI), which would be the “first and solely” communications infrastructure firm to share 2023 steering this quarter. That ought to provide a read-through for home leasing at American Tower (AMT) and SBA Communications (SBAC), Barden says.