Nevertheless, IHS Holding Limited IHS and Anterix Inc. ATEX are likely to gain from solid demand for scalable infrastructure for seamless connectivity with the wide proliferation of IoT, transition to cloud and next-gen technologies, and accelerated 5G rollout.
Industry Description
The Zacks Communication - Infrastructure industry players provide various infrastructure solutions for core, access and edge layers of communication networks. Leveraging proprietary modeling and simulation techniques to optimize networks, the firms offer high-speed network access solutions across Internet protocol, asynchronous transfer mode and time-division multiplexed architecture in both wireline and wireless network applications. Their product portfolio encompasses optical fiber and twisted-pair structured cable solutions, infrastructure management hardware and software, network racks and cabinets, fiber-to-home equipment like hardened connector systems, wireless network backhaul planning and optimization products, couplers and splitters, indoor, small cell and distributed wireless antenna systems and hardened optical terminating enclosures.
What's Shaping the Future of the Communication - Infrastructure Industry?
Network Convergence: With operators moving toward converged or multi-use network structures, combining voice, video and data communications into a single network, the industry is increasingly developing solutions to support wireline and wireless network convergence. These investments are likely to help minimize service delivery costs to adequately support broadband competition and expand rural coverage and wireless densification in the long run. The industry players have enabled enterprises to rapidly scale communications functionalities to a vast range of applications and devices with easy-to-use software application programming interfaces. The firms support high user volumes without affecting deliverability and cost-effectively eliminate performance degradation.
Soaring Raw Material Prices: High raw material prices due to inflation, economic sanctions against the Putin regime and intensifying tensions in the Middle East have affected the operation schedules of various firms. Extended lead times for basic components are also likely to hurt the delivery schedule and escalate production costs. The demand-supply imbalance has crippled operations and largely affected profitability due to inflated equipment prices.
Focus on Higher Average Revenue Per User: Industry participants are rapidly transforming themselves from legacy copper-based telecommunications firms to technology powerhouses. At the same time, the firms continue to focus on leveraging wireline momentum, expanding media coverage, improving customer service and achieving a competitive cost structure to generate higher average revenue per user while attracting new customers. Also, these firms offer the flexibility to better manage data traffic by leveraging indigenous software-defined networks to enable low-latency, high-bandwidth applications for faster access to data processing.
Zacks Industry Rank Indicates Bullish Prospects
The Zacks Communication - Infrastructure industry is housed within the broader Zacks Computer and Technology sector. It carries a Zacks Industry Rank #3, which places it in the top 1% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates rosy prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
Before we present a couple of communication infrastructure stocks that are well-positioned to outperform the market based on a strong earnings outlook, let’s take a look at the industry’s recent stock market performance and valuation picture.
Industry Outperforms S&P 500 & Sector
The Zacks Communication - Infrastructure industry has outperformed the broader Zacks Computer and Technology sector and the S&P 500 composite over the past year.
The industry has surged 60.2% over this period compared with the S&P 500 and the sector’s growth of 10.6% and 10.5%, respectively.
One-Year Price Performance
Industry's Current Valuation
On the basis of the trailing 12-month enterprise value-to-EBITDA (EV/EBITDA), which is the most appropriate multiple for valuing telecom stocks, the industry is currently trading at 3.48X compared with the S&P 500’s tally of 17.08X. It is also trading below the sector’s trailing 12-month EV/EBITDA of 16.28X.
Over the past five years, the industry has traded as high as 9.82X, as low as 2.1X and at the median of 6.91X, as the chart below shows.
Trailing 12-Month Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
2 Communication - Infrastructure Stocks to Watch
IHS Holding: Based in London, the United Kingdom, IHS Holding is one of the largest independent owners, operators and developers of shared communications infrastructure in the world by tower count. It has more than 40,000 towers across 11 markets — Brazil, Cameroon, Colombia, Egypt, Kuwait, Nigeria, Peru, Rwanda, South Africa and Zambia. The company’s open-access, shared infrastructure approach ensures a robust and scalable fiber network that multiple operators can utilize. The connectivity of towers enables the extension of fiber infrastructure into key metropolitan areas, facilitating the delivery of digital services to residences, businesses and public entities in collaboration with its clients. The stock has gained 36.4% in the past year. The Zacks Consensus Estimate for current-year earnings has been revised upward by 24.1% to 72 cents per share since March 2024, while the same for 2026 is up 31.2% to 84 cents. IHS Holding has a VGM Score of A and sports a Zacks Rank #1 (Strong Buy).
Price and Consensus: IHS
Anterix: Headquartered in Woodland Park, NJ, Anterix is a premier wireless communications firm. It reportedly holds the largest licensed spectrum in the 900 MHz band, with coverage throughout the United States, Alaska, Hawaii and Puerto Rico. Anterix expects to monetize its spectrum assets to generate long-term value. The stock has gained 11.3% in the past year. The Zacks Consensus Estimate for current-year earnings has been revised upward by 22.7% since March 2024, while the same for 2026 is up 77.5%. It carries a Zacks Rank #2 (Buy).
Price and Consensus: ATEX
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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
