One slice of the market threatens to ruin the S&P 500's clean earnings sheet (VZ, TMUS, S, CTL)

pulse

May 1, 2017 3:57 PM

Verizon's profit drop turned telecom earnings negative year-on-year.

A worker climbs on a cellular communication tower on March 6, 2014 in Oakland, California.

One sector is on pace to ruin the S&P 500's clean earnings sheet for the first quarter.

Telecoms, the smallest sector by number of constituents, has failed to deliver on the earnings growth that Wall Street had been anticipating after a run up in prices.

According to a FactSet report on Friday, telecom services was the only sector reporting a year-over-year decline in earnings, at -4.8%.

That's due to Verizon, one of just four companies in the sector. If Verizon is excluded, the blended earnings growth rate, which combines reported and estimated results, would rise to 0.2%, according to FactSet.

On April 20, the company reported adjusted earnings per share of $0.95, missing analysts' estimates by one cent. Operating revenue fell 7.3% year-on-year to $29.8 billion.

Verizon's earnings and sales fell as it lost 307,000 customers in the first quarter, the most in over a decade. Amid a price war with other carriers, Verizon revived an unlimited data offering to try and stem a loss of subscribers to other networks, but it was a little too late.

T-Mobile raised its estimate for the number of subscribers it expects to gain this year to a range of 2.8 million to 3.5 million from . Its outlook for profit was unchanged, suggesting that subscriber growth will be prioritized ahead of earnings growth, Bloomberg noted.

In contrast to Verizon, T-Mobile added 914,000 new subscribers in the first quarter, beating analysts' forecast for 820,000.

Sprint and CenturyLink are slated to report earnings on Wednesday.

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