Earnings trends are extremely important when evaluating stocks. At Wall St. Cheat Sheet, we view increasing earnings quarter-over-quarter as a simple way to gauge whether costs and the business model are stable. Then we like to analyze whether the company is outperforming peers in the sector. This is what we call the “E-Squared” investment analysis (‘E = Earnings Are Increasing Quarter-Over-Quarter’ + ‘E = Excellent Relative Performance Versus Peers and Sector’).
Stocks with improving earnings metrics are worthy of your extra attention. Click here to discover our CHEAT SHEET stock picks now!
Here’s your Cheat Sheet to how the top 5 telecom stocks rank via earnings trends
Sprint Nextel Corp. (NYSE:S): Current Price $5.78
| Fiscal Year | 2008 | 2009 | 2010 | 2011 | 2012 |
| Revenue ($) in millions | 35,640 | 32,260 | 32,560 | 33,680 | 35,340 |
| Diluted EPS ($) | -0.98 | -0.84 | -1.16 | -0.96 | -1.44 |
We find that sales are flat and there are no profits for the shareholders. Sprint has had negative EPS for the past five years.
Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:
| Quarter | Dec. 31, 2011 | Mar. 31, 2012 | Jun. 30, 2012 | Sep. 30, 2012 | Dec. 31, 2012 |
| Revenue ($) in millions | 8,722 | 8,734 | 8,843 | 8,763 | 9,005 |
| Diluted EPS ($) | -0.43 | -0.29 | -0.46 | -0.26 | -0.44 |
Unfortunately, the quarterly numbers are also awash in red, and we can drop Sprint right away from the list.
Verizon Communications Inc. (NYSE:VZ): Current Price $46.12
| Fiscal Year | 2008 | 2009 | 2010 | 2011 | 2012 |
| Revenue ($) in millions | 97,350 | 107,810 | 106,560 | 110,880 | 115,850 |
| Diluted EPS ($) | -0.77 | 1.72 | 0.90 | 0.85 | 0.31 |
Verizon has grown its revenue nicely over the years, but we are concerned that EPS is going one way – downhill – after 2009.
Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:
| Quarter | Dec. 31, 2011 | Mar. 31, 2012 | Jun. 30, 2012 | Sep. 30, 2012 | Dec. 31, 2012 |
| Revenue ($) in millions | 28,440 | 28,240 | 28,550 | 29,010 | 30,040 |
| Diluted EPS ($) | -0.72 | 0.59 | 0.64 | 0.56 | -1.48 |
Verizon clocked a huge negative EPS in the latest quarter, and for that reason, Verizon is disqualified from this analysis.
AT&T, Inc. (NYSE:T): Current Price $35.49
| Fiscal Year | 2008 | 2009 | 2010 | 2011 | 2012 |
| Revenue ($) in millions | 123,440 | 122,510 | 124,280 | 126,720 | 127,430 |
| Diluted EPS ($) | -0.44 | 2.05 | 3.35 | 0.66 | 1.25 |
AT&T, too, has improved revenue after 2009 and EPS has improved sharply in 2012.
Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:
| Quarter | Dec. 31, 2011 | Mar. 31, 2012 | Jun. 30, 2012 | Sep. 30, 2012 | Dec. 31, 2012 |
| Revenue ($) in millions | 32,500 | 31,820 | 31,580 | 31,460 | 32,580 |
| Diluted EPS ($) | -1.12 | 0.60 | 0.66 | 0.63 | -0.64 |
EPS in the last quarter there has also plunged into the red. AT&T is therefore also dropped….
MetroPCS Communications, Inc. (NYSE:PCS): Current Price $9.66
| Fiscal Year | 2008 | 2009 | 2010 | 2011 | 2012 |
| Revenue ($) in millions | 2,752 | 3,481 | 4,069 | 4,847 | 5,101 |
| Diluted EPS ($) | 0.42 | 0.49 | 0.54 | 0.82 | 1.07 |
MetroPCS is charting excellent growth in both revenue and EPS.
Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:
| Quarter | Dec. 31, 2011 | Mar. 31, 2012 | Jun. 30, 2012 | Sep. 30, 2012 | Dec. 31, 2012 |
| Revenue ($) in millions | 1,238 | 1,277 | 1,281 | 1,259 | 1,284 |
| Diluted EPS ($) | 0.25 | 0.06 | 0.41 | 0.52 | 0.09 |
Unfortunately, profits plunged in the December 2012 quarter, and we therefore look elsewhere for our candidate in this sector…
Leap Wireless International Inc. (NASDAQ:LEAP): Current Price $5.69
| Fiscal Year | 2008 | 2009 | 2010 | 2011 | 2012 |
| Revenue ($) in millions | 2,032 | 2,481 | 2,697 | 3,071 | 3,142 |
| Diluted EPS ($) | -2.21 | -3.30 | -11.49 | -4.11 | -2.45 |
We see that Leap has steadily grown revenue between 2008 and 2012, but profits have been elusive…
Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:
| Quarter | Dec. 31, 2011 | Mar. 31, 2012 | Jun. 30, 2012 | Sep. 30, 2012 | Dec. 31, 2012 |
| Revenue ($) in millions | 767.40 | 825.62 | 786.77 | 773.97 | 755.98 |
| Diluted EPS ($) | -1.10 | -1.28 | -0.54 | 0.32 | -0.95 |
Like the others, Leap has also had a dismal quarter in December 2012, and also becomes an also-ran in this list…
Conclusion
No company satisfies the essential condition of earnings increasing quarter-over-quarter in this “E-Squared” investment analysis of top telecom stocks.
“E = Earnings Are Increasing Quarter-Over-Quarter” is a core component of our successful CHEAT SHEET investing framework. Don’t waste another minute – click here to discover our CHEAT SHEET stock picks now!