Yi Ping Ho
The regional bells were suffering in today's trading session as investors reacted negatively to SBC Communications' (SBC Quote - Cramer on SBC - Stock Picks) first-quarter results and weak forecast.
Shares of SBC dipped to a 52-week low of $38.38 on the New York Stock Exchange, but lately rebounded to $39.65, down 0.9% on they day. The other regional bells and telecom carriers were also mired in negative territory. BellSouth (BLS Quote - Cramer on BLS - Stock Picks), whose first-quarter earnings on Friday missed analysts' estimates by 2 cents a share, lately lost 0.8% to $40.09, while Verizon (VZ Quote - Cramer on VZ - Stock Picks) slipped 2.9% to $51.51. Qwest Communications (Q Quote - Cramer on Q - Stock Picks) was off 2.3% to $36.54. The Nasdaq Telecommunication Index, which tracks more than 170 telecom companies, was down 4.6%. The index has nevertheless gained almost 27% since April 4. Dow
component AT&T (T Quote - Cramer on T - Stock Picks), which is scheduled to report earnings tomorrow, lost 2.9% to $22.25. Long-distance rivals Sprint (FON Quote - Cramer on FON - Stock Picks) and WorldCom (WCOM Quote - Cramer on WCOM - Stock Picks) were also weaker. Telecom analyst Anthony Ferrugia at A.G. Edwards noted that while SBC's results came in a little under his projections, he wasn't expecting the stock to fall too far. "The stock has been so depressed lately that I didn't really anticipate a lot of negative reaction as a result of stock price decline," he said. "The company is trading in a range of reasonable value." In a prepared statement this morning, SBC, which is based in San Antonio, Texas, said first-quarter earnings fell to $1.7 billion, or 51 cents a share, from $1.9 billion, or 56 cents a share, in the year-ago period. The company attributed the decline to the weaker economy. SBC, which has won regulatory approval to offer long distance in Kansas, Oklahoma and Texas, and has an application pending in Missouri, also gave a weaker-than-expected outlook for 2001. "Some people are wondering if Verizon is subject to the same negative influence, and whether their quarter will be weaker," Ferrugia said. The analyst believes that Verizon is currently more expensive than SBC or BellSouth, given that most people think that the company has one of the best strategic sets of assets in the industry. Earnings aside, this week could be crucial for the regional bells as federal legislators discuss the companies' interest in offering long-distance data services. Though they have made some inroads, Verizon, SBC and other local carriers have been barred from offering unlimited high-speed data services until they prove to regulators that their local networks are open to competitors. "If the Baby Bells are given access, that would definitely be a positive," Ferrugia said. He added that "to my knowledge, that is not something that is imminent at this point. It's not something that I would include in my valuation of these companies."
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