Updated Research Report on U.S. Cellular - Analyst Blog

On Mar 11, 2014, we issued an updated research report on United States Cellular Corporation USM. The company reported dismal fourth-quarter results with the top and the bottom line lagging the Zacks Consensus Estimate and the year-ago figures.

However, in the coming quarter, we expect U.S. Cellular to gain from LTE expansion and higher smartphone sales. Further, the expected launch of equipment financing is likely to offset subsidy headwinds to a large extent.

U.S. Cellular has delivered negative earnings surprise in the last three quarters out of four, with an average negative surprise of 31.5%.

Meanwhile, U.S. Cellular has undertaken a number of strategic initiatives to accelerate growth. The strategies include introduction of a new billing system, expansion of distribution channels, continuous rollout of 4G LTE, enhancement of LTE handsets and closing of various spectrum transactions. The company is also focused on improving cost and profitability by managing equipment subsidies and data delivery cost.

However, U.S. Cellular operates in an intensely competitive wireless market and remains significantly challenged by low-cost mobile service plans from competitors. On a regional level, the company competes with Leap Wireless. Additionally, U.S. Cellular remains highly susceptible to aggressive pricing by major rivals.

United States Cellular currently carries a Zacks Rank #3 (Hold).

Stocks That Warrant a Look

Other better-ranked stocks worth considering in this sector include Telecom Italia S.p.A. TI, Level 3 Communications, Inc. LVLT and Nippon Telegraph and Telephone Corp. NTT. Both Level 3 Communications and Nippon Telegraph and Telephone have a Zacks Rank #2 (Buy), while Telecom Italia sports a Zacks Rank #1 (Strong Buy).