I'm just concerned with the massive sell off today. Down almost 3%. I know there is enough cash flow but, What could have caused this selloff ? Why are Seeking Alpha and MF always attacking this stock ?
It's about the quarterly revenues ! They have to either improve the quarterly revenues or reduce capex ! If they can't successfully do either, the dividend will be reduced and the price of the stock will drop significantly !
I never said anything about falling parts ! What I was trying to convey is that if this conglomeration of CLECS that now make up the company called Winstream we're doing well individually, there would be no need for these companies to merge together. It's called M&A or mergers and aquisitions .
I still use land lines as well but, these CLECS cater to B2B customers only and in case you haven't noticed, the competition for these services are fierce ! Too many CLECS competing for the same business ! If, they don't improve their quarterly revenues, the stock price will fall .
They are hiring more sales people because, they need more revenue ! That's it ! If they don't make there quarterly revenue goals, they stock price will drop further !
I'm sure the people that work for WIN are very fine and qualified people but, this company is a conglomeration of failing CLECS all bunched together to make one big failing CLEC!
3 Companies Drowning in Debt
I ran a screen for companies with poor liquidity and solvency ratios. While this doesn't necessarily signal imminent bankruptcy, these four companies all appear to be cash-strapped and overleveraged at the moment. And that's a dangerous place to be, especially if business doesn't improve.
Here are 3 names from the list:
Windstream Holdings (WIN-Free Report)
Current Ratio: 0.76
Quick Ratio: 0.57
Interest Coverage Ratio: 1.34
Emeritus Corp (ESC-Free Report)
Current Ratio: 0.71
Quick Ratio: 0.54
Interest Coverage Ratio: 0.61
Casella Waste Systems (CWST-Free Report)
Current Ratio: 0.76
Quick Ratio: 0.65
Interest Coverage Ratio: 1.02
The Bottom Line
For corporations, a prudent amount of debt can be beneficial. But too much debt will increase the risks of bankruptcy and put shareholders at risk. These 3 companies appear to be in over their heads at the moment.
They are not going mobile because, it would be too expensive to build or utilize a mobile network. They are in the landline and Cloud computing business. They don't have the money to expand into newer technologies because, most of their FOCF is going towards paying the dividend.
Windstream exited the third quarter with cash and cash equivalents of $73.4 million compared with $132.0 million at the end of 2012. Long-term debt and capital lease obligations were $8,760.8 million compared with $8,099.8 million at the end of 2012.
For the third quarter, the company generated adjusted free cash flow of $264.0 million and capital expenditure was $187.4 million.
We believe that a competitive market scenario, continuous access line loss, regulatory issues and constant upgrades in the technological scenario will impede the company’s growth.
The communications and cloud services provider's third quarter earnings were weaker than expected. Perhaps the blame can be limited to lower subscribers of voice and digital television, but the company did show strong data revenue as well as sales in its integrated services. Total revenue in services was down 2.6% and product sales were down over 6%.
Windstream ended its third quarter with cash of $73.4 million, lower than the $132 million a year ago. Adjusted free cash flow was $264 million and its capital spending was $187.4 million. Its long-term debt and capital lease obligations were $8.76 billion versus $8.1 billion a year ago.
The issue that always arises is how this company manages its cash flows in a manner in which it can pay higher dividends than it makes in income. Many companies can accomplish this. Some do it for years, as Windstream has managed to accomplish. That being said, most investors are going to look for dividend coverage with higher earnings rather than creative cash flow management.
Again, Windstream's dividend news was just made this week, and the payable and ex-dates are almost two months out. That implies that no serious dividend news would be coming up potentially for months. If you think that other investors do not have questions about its dividend, then why is the short interest up over 84 million shares?
Windstream shares were down 4.6% at $8.25 in late afternoon trading against a 52-week range of $7.50 to $10.00. Trading volume has also passed 14.8 million shares versus an average of 5.3 million shares.
Well said Ktumle ! But, if this is a sign for things to come ( quarterly losses ) and you're holding on, you're going to offset your dividends with your loss on principle ! Good luck !
I thought cloud computing was in high demand ! What happened ?
They announce a quarterly revenue of 308.6mm which is down from previous quarter and the stock jumps 10% ?
Period Ending Jun 30, 2013 Mar 31, 2013 Dec 31, 2012 Sep 30, 2012
Total Revenue 310,173 320,016 331,637 341,770
Cost of Revenue 151,380 154,424 156,148 162,871
Gross Profit 158,793 165,592 175,489 178,899
Windstream has been adamant about keeping its dividend at current levels. Like Frontier and CenturyLink, Windstream has struggled against the challenges of declines in its legacy landline business, and those declines are likely to continue in the face of continued technological advances that threaten to make traditional phone service obsolete. Yet earlier this year, shortly after CenturyLink cut its dividend, Windstream CEO Jeff Gardner said that cuts in capital spending and interest expense would help the rural telecom sustain its payout. Analysts remain skeptical, though, arguing that high debt will continue to weigh on Windstream's overall business and that diverting resources away from potential growth could do more harm than good.
In general, investors need to pay close attention when highly indebted companies keep making massive dividend payouts. With low interest rates, such moves might make sense from a purely financial perspective. But in the long run, if refinancing debt becomes more difficult than the easy conditions that prevail today, dividend investors could easily get a nasty shock.