The Quarter in Review

The fourth quarter of 2023 proved to be a victorious one for Telephone and Data Systems, Inc. (TDS) as the company reported resilient financial results surpassing the Zacks Consensus Estimate. While revenue from the U.S. Cellular segment suffered a setback, the growth in total broadband connections offered some respite, allowing the company to exceed its fiber address target for the fiscal year.

Net Income and Revenues

TDS reported a net loss of $12 million, or 11 cents per share, during the quarter, a significant improvement compared to the year-ago quarter when the company reported a net loss of $43 million, or 38 cents per share. The bottom line outperformed the Zacks Consensus Estimate by an impressive 6 cents. Despite the decline in net sales to $1.31 billion from $1.35 billion in the previous year’s quarter, the company managed to beat the Zacks Consensus Estimate for revenues by $29 million. In 2023, TDS reported total operating revenues of $5.16 billion, down from $5.41 billion in 2022.

Segment Performance

Revenues from U.S. Cellular stood at $1 billion, reflecting a 5% decline year over year due to a reduction in postpaid retail and prepaid connections. Notwithstanding, the company witnessed growth in fixed wireless customers and tower revenues. Additionally, TDS Telecom contributed $261 million to revenues. The company’s operating loss was $524 million compared with a loss of $26 million in the year-ago period, with a significant impact from the loss on impairment of goodwill in the TDS Telecom segment.

Cash Flow and Outlook

Telephone and Data Systems generated $218 million of net cash from operating activities in the fourth quarter of 2023, and totaled $1.14 billion for the year. As of December 31, 2023, the company had $236 million in cash and cash equivalents, with $4.08 billion of long-term debt, compared with $360 million and $3.73 billion, respectively, in the previous year.

For 2024, management expects total operating revenues at TDS Telecom in the range of $1.07-$1.1 billion, with adjusted EBITDA estimated in the band of $310-340 million. Service revenues for U.S. Cellular are anticipated in the range of $2.95-$3.05 billion, with projected adjusted EBITDA between $920-$1,020 million and anticipated capital expenditure in the band of $550-$650 million.

Stocks and Rankings

TDS currently carries a Zacks Rank #4 (Sell). In comparison, NVIDIA Corporation (NVDA), holding a Zacks Rank #2 (Buy), delivered a trailing four-quarter average earnings surprise of 18.99%. InterDigital, Inc. (IDCC) and Arista Networks, Inc. (ANET), both carrying a Zacks Rank #2 at present, showed strong quarterly earnings performances.