Analyst’s Handbook: Telecommunication Services Yardeni Research, Inc. October 17, 2014 Dr. Edward Yardeni 516-972-7683 [email protected] Mali Quintana 480-664-1333 [email protected] Please visit our sites at www.yardeni.com blog.yardeni.com thinking outside the box Table Of Contents Table Of Contents S&P 500: Telecommunication Services S&P 500/400/600 Telecommunication Services YTD Earnings Revenues & Margins Earnings Growth & Valuation October 17, 2014 / Analyst’s Handbook: Telecommunication Services 2 3 4 5 6 Yardeni Research, Inc. www.yardeni.com Figure 1. 375 375 S&P 500 TELECOMMUNICATION SERVICES INDEX* 325 325 275 275 225 225 175 175 10/17 125 125 yardeni.com 75 75 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 200-day moving average. * Ratio scale. Source: Standard & Poor’s Corporation and Haver Analytics. Figure 2. .35 .35 S&P 500 TELECOMMUNICATION SERVICES (as a ratio of S&P 500) .30 .30 .25 .25 .20 .20 .15 .15 .10 .10 10/10 yardeni.com .05 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 .05 18 Note: Shaded areas denote recessions according to the National Bureau of Economic Research. Monthly through December 1990, then weekly. Monthly data an average of Long Distance and Telephone industry ratios. Source: Standard & Poor’s Corporation. Page 1 / October 17, 2014 / Analyst’s Handbook: Telecommunication Services Yardeni Research, Inc. www.yardeni.com S&P 500: Telecommunication Services Figure 3. 220 S&P 500 TELECOMMUNICATION SERVICES S&P 500 WIRELESS TELECOMMUNICATION 400 (AMT PCS S) 180 300 10/17 2/28 140 200 100 100 60 0 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 200 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 S&P 500 INTEGRATED TELECOMMUNICATION (CTL FTR Q T VZ WIN) 10/17 160 120 yardeni.com 80 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 200-day moving average Source: Standard and Poor’s Corporation. Page 2 / October 17, 2014 / Analyst’s Handbook: Telecommunication Services Yardeni Research, Inc. www.yardeni.com S&P 500/400/600 Telecommunication Services YTD 40 All Sectors Figure 4. S&P 500 LargeCap 35 20 25 25 10 0 15 5 15 5 2.1 -20 35 25 15 5 -5 -15 -25 -35 60 -1.5 -5 Jan Feb Mar Apr May Jun Jul 2014 Aug Sep Oct Nov Dec -.3 Jan Feb Mar Apr May Jun Jul 2014 Aug Sep Oct Nov Dec -15 35 25 15 5 -5 -15 -25 -35 Jan Feb Mar Apr May Jun Jul 2014 Aug Sep Oct Nov -5 Dec 12.9 Jan Feb Mar Apr May Jun Jul 2014 Aug Sep Oct Nov Dec 40 Integrated Telecom Services Wireless Telecom Services -15 35 25 15 5 -5 -15 -25 -35 60 -6.1 Jan Feb Mar Apr May Jun Jul 2014 Aug Sep Oct Nov Dec -11.0 Jan Feb Mar Apr May Jun Jul 2014 Aug Sep Oct Nov Dec 40 20 20 0 9.8 0 -.9 -20 -40 100 80 60 40 20 0 -20 -40 -60 S&P 600 SmallCap 45 35 -10 Telecom Services Sector S&P 400 MidCap 45 30 -20 Jan Feb Mar Apr May Jun Jul 2014 Aug Sep Oct Nov Dec 3.4 Jan Feb Mar Apr May Jun Jul 2014 Aug Sep Oct Nov Dec -40 100 80 60 40 20 0 -20 -40 -60 Jan Feb Mar Apr May Jun Jul 2014 Aug Sep Oct Nov Dec -9.2 yardeni.com Jan Feb Mar Apr May Jun Jul 2014 Aug Sep Oct Nov Dec Source: Standard & Poor’s Corporation. Page 3 / October 17, 2014 / Analyst’s Handbook: Telecommunication Services Yardeni Research, Inc. www.yardeni.com Earnings Figure 5. 14 13 14 S&P 500 TELECOMMUNICATION SERVICES OPERATING EARNINGS PER SHARE (analysts’ average forecasts, ratio scale) 13 Consensus Forecasts 12 10/9 15 Annual estimates Forward earnings* 11 12 11 14 10 10 13 9 9 8 8 7 7 yardeni.com 6 6 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 * Time-weighted average of the consensus estimates for current and next year. Monthly through December 2005, weekly thereafter. Source: Thomson Reuters I/B/E/S. Figure 6. 25 25 S&P 500 TELECOMMUNICATION SERVICES NET EARNINGS REVISIONS* 20 20 15 15 10 10 5 5 0 0 -5 -5 Sep -10 -10 -15 -15 -20 -20 -25 -25 -30 -30 -35 -35 yardeni.com -40 -40 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 * Three-month moving average of the number of forward earnings estimates up less number of estimates down, expressed as a percentage of the total number of estimates. Source: Thomson Reuters I/B/E/S. Page 4 / October 17, 2014 / Analyst’s Handbook: Telecommunication Services Yardeni Research, Inc. www.yardeni.com Revenues & Margins Figure 7. 130 130 S&P 500 TELECOMMUNICATIONS SERVICES REVENUES PER SHARE (analysts’ average forecasts, ratio scale) Consensus Forecasts 120 14 15 120 Annual estimates Forward revenues* 13 10/9 110 110 100 100 90 90 yardeni.com 80 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 80 2015 * Time-weighted average of the consensus estimates for current and next year. Monthly through December 2005, weekly thereafter. Source: Thomson Reuters I/B/E/S. Figure 8. 13 13 S&P 500 TELECOMMUNICATION SERVICES PROJECTED PROFIT MARGIN (using analysts’ average earnings and revenues forecasts) 12 12 Consensus Forecasts Annual estimates 11 Forward profit margin* 11 10/9 10 10 15 9 9 14 13 8 8 7 7 6 6 yardeni.com 5 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 5 2015 * Time-weighted average of the consensus estimates for current and next year. Monthly through December 2005, weekly thereafter. Source: Thomson Reuters I/B/E/S. Page 5 / October 17, 2014 / Analyst’s Handbook: Telecommunication Services Yardeni Research, Inc. www.yardeni.com Earnings Growth & Valuation Figure 9. 30 25 30 S&P 500 TELECOMMUNICATIONS SERVICES LTEG VS STEG (percent) 25 LTEG* (3.6) 20 20 STEG* (7.8) 15 15 10 10 10/9 5 5 0 0 -5 -5 -10 -10 -15 -15 yardeni.com -20 -20 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 * STEG: 12- month (52-week) forward consensus expected earnings growth. LTEG: 5-year forward consensus expected earnings growth. Monthly data through 2005, weekly thereafter. Source: Thomson Reuters I/B/E/S. Figure 10. 35 35 S&P 500 TELECOMMUNICATION SERVICES VALUATION 30 30 25 25 20 20 15 10 10/9 15 10 Forward P/E* (13.4) 5 5 5 5 4 Relative P/E** (0.9) 4 3 PEG Ratio*** (3.7) 3 2 2 1 10/9 yardeni.com 0 1 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 * Price divided by 12-month forward consensus expected operating earnings per share. ** Sector or industry forward P/E relative to S&P 500 forward P/E. *** Sector or industry forward P/E relative to sector or industry consensus 5-year LTEG forecast. Source: Thomson Reuters I/B/E/S. Page 6 / October 17, 2014 / Analyst’s Handbook: Telecommunication Services Yardeni Research, Inc. www.yardeni.com Copyright (c) Yardeni Research, Inc. 2014. All rights reserved. The information contained herein has been obtained from sources believed to be reliable, but is not necessarily complete and its accuracy cannot be guaranteed. 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