Telephone & Data Systems Earnings Preview

Investors braced for a bumpy ride ahead of Telephone & Data Systems' (NYSE: TDS  ) earnings announcement as the company has wavered between beating and falling short of analyst predictions during the past fiscal year. The company will unveil its latest earnings on Monday, August 1. Telephone and Data Systems, Inc. is a diversified telecommunications service company with wireless operations provided by United States Cellular Corp, and wireline operations provided by TDS Telecommunications Corp.

What analysts say:

• Buy, sell, or hold?: Analysts think investors should stand pat on Telephone & Data Systems with four of six analysts rating it hold. Analysts don't like Telephone & Data Systems as much as competitor NTELOS Holdings overall. Six out of eight analysts rate NTELOS Holdings a buy compared to one of six for Telephone & Data Systems. Analysts still rate the stock a hold, but they are a bit more wary about it compared to three months ago.
• Revenue Forecasts: On average, analysts predict $1.27 billion in revenue this quarter. That would represent a rise of 3.3% from the year-ago quarter.
• Wall Street Earnings Expectations: The average analyst estimate is earnings of $0.34 per share. Estimates range from $0.30 to $0.38.

What our community says:
CAPS All-Stars are solidly backing the stock with 89.5% giving it an "outperform" rating. The community at large backs the All-Stars with 84.3% awarding it a rating of "outperform." Fools are gung-ho about Telephone & Data Systems, though the message boards have been quiet lately with only 43 posts in the past 30 days. Despite the majority sentiment in favor of Telephone & Data Systems, the stock has a middling CAPS rating of three out of five stars.

Management:
Telephone & Data Systems' income has fallen year over year by an average of 13.9%. Revenue has now gone up for three straight quarters. The company's gross margin shrank by 2.3 percentage points in the last quarter. Revenue rose 2.9% while cost of sales rose 9.5% to $486.7 million from a year earlier.

Now let's look at how efficient management is at running the business. Traditionally, margins represent the efficiency with which companies capture portions of sales dollars. The following table shows gross, operating, and net margins over the past four quarters. 

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