The telecom industry has been evolving rapidly since last year to provide high-speed network connectivity to keep up with the heightened market demand. Companies have introduced game-changing solutions, such as the 5th generation (5G) technology and artificial intelligence (AI)-backed conversational platforms to meet the demand for high-speed connectivity and enhanced customer experience.
Furthermore, amid the ongoing 5G race, telecom giants have been commercially deploying 5G to secure and/or maintain high market shares. With next-generation connectivity deployment and constant innovation, the global telecom market is expected to reach $2713.53 billion in 2021, growing at a 6.2% CAGR.
The current global semiconductor shortage and trade restrictions with major producers such as China have been significant headwinds for the domestic telecom industry. Conversely, foreign operators Nippon Telegraph and Telephone Corporation (NTTYY) and América Móvil, S.A.B. de C.V. (AMX) have demonstrated impressive performance and we think are likely to grow further in the coming months.
Nippon Telegraph and Telephone Corporation (NTTYY)
Japan’s NTTYY provides fixed voice-related, mobile voice-related, IP/packet communications, and system integration services. The company operates in five segments: mobile communications; regional communications; long-distance and international communications; data communications; and other. On July 27, NTTYY and ACCESS Co. Ltd. announced a business and technology partnership to promote the realization of Innovative Optical and Wireless Network (IOWN). In the wake of digitization and continuing social distancing, this innovation should allow NTTYY to emerge as a prominent player in the industry.
NTTYY and Fujitsu Hong Kong announced on July 21 a collaboration to drive Mobile Digital Workplaces to enable users to be more productive and creative anywhere in an office or other on-site locations. The mobile workspace solution should gain popularity quickly owing to the increased demand for hybrid work structures.
NTTYY’s operating revenues increased marginally year-over-year to ¥11.94 trillion ($0.11 trillion) in the year ended March 31. Its operating profit grew 7% from its year-ago value to ¥1.67 trillion ($0.02 trillion). NTTYY’s profit came in at ¥1.13 trillion ($0.01 trillion), indicating a 1.5% rise year-over-year. The company’s EPS increased 7.3% year-over-year to ¥248.15 ($2.26).
Street expects NTTYY’s EPS to increase at a rate of 7.8% per annum over the next five years. Shares of NTTYY have gained 6.1% over the past year.
NTTYY has an overall B rating, which equates to Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
NTTYY has an A grade for Stability, and a B for Value. Among the 50 stocks in the B-rated Telecom - Foreign industry, NTTYY is ranked #8. To see more of NTTYY’s component grades, click here.
América Móvil, S.A.B. de C.V. (AMX)
Based in Mexico, AMX provides telecommunications services. The company’s segments include Mexico Wireless, Mexico Fixed, Brazil, Colombia, Southern Cone, Andean Region, Central America, the Caribbean, the United States, and Europe.
AMX’s total revenues increased marginally year-over-year to MX$252.51 billion ($12.64 billion) in its fiscal second quarter, ended June 30. Its operating profit grew 9.3% from its year-ago value to MX$44.71 billion ($2.24 billion), while its net income improved 119.6% year-over-year to MX$42.82 billion ($2.14 billion). The company’s earnings per ADR increased 156% year-over-year to $0.64.
Analysts expect AMX’s revenues to increase 3.2% year-over-year to $48.88 billion in the current year. The $1.11 consensus EPS estimate for the current year indicates an 82% rise versus the last year. Shares of AMX have gained 23.1% over the past year and 17.1% over the past six months.
It is no surprise that AMX has an overall A rating, which equates to Strong Buy in our proprietary POWR Ratings system. The stock has an A grade for Stability, and a B for Growth, Value, Sentiment, and Quality. It is ranked #4 in the Telecom - Foreign industry. To see the AMX rating for Momentum and other additional details, click here.
NTTYY shares were trading at $25.83 per share on Wednesday afternoon, up $0.09 (+0.35%). Year-to-date, NTTYY has gained 1.99%, versus a 18.12% rise in the benchmark S&P 500 index during the same period.
About the Author: Subhasree Kar
Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics.
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