CommScope could be the benefactor of service providers’ wireless spectrum rollouts and fiber network expansion efforts in the coming year.
Barclays said in a research note that these new network expansions could be coupled with service providers increasing overall spending.
“A focus on spectrum deployment and fiber builds should drive a gradual benefit to the company on the back of rising U.S. carrier capex,” Barclays said. “Our analysis suggests that consensus estimates have been increasingly de-risked since management provided its loose guidance for 2018.”
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According to the research firm’s estimates, U.S. carrier capex is poised to rise 12% in 2018, reflecting what it says is “the largest increase in five years.”
Barclays pointed to efforts by large carriers like AT&T expand their wireline and wireless networks for residential and business uses. AT&T has been aggressively rolling out fiber to more business and residential customers.
As of the end of the fourth quarter, AT&T reported that it reached nearly 400,000 business buildings with its own lit fiber facilities. As a result, the service provider now covers over 1.8 million U.S. business customer locations. The telco said it is “adding thousands more buildings each month,” which could be more opportunities for CommScope to provide its connectivity products.
On the FTTH front, AT&T claimed it now delivers FTTH services to 7 million locations across 67 metros with plans to reach at least 12.5 million locations by mid-2019.
“We consider a recovery at AT&T a material tailwind. While an improvement in connectivity is likely to be more gradual given COMM's industry position (connectivity solutions vs. fiber), constructive demand trends should emerge in the mid- to longer-term.
In the near-term, it appears CommScope has its work cut out for itself.
CommScope will release its fourth-quarter financial results on Thursday, Feb. 15, before the market opens. During the third quarter, CommScope reported that Connectivity Solutions segment sales declined 13% year over year to $709 million.
The vendor noted in its third-quarter revenue report that in the Connectivity Solutions segment modest growth in the Europe, Middle East and Africa region was more than offset by lower sales in the U.S., Asia-Pacific and Latin American regions. Lower sales at three large customers drove approximately three-quarters of the revenue decline.