Hawaiian Telecom Upgraded to Strong Buy

Zacks

On Sep 27, Zacks Investment Research upgraded Hawaiian Telecom Holdco, Inc. (HCOM) to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

Hawaiian Telecom has been witnessing rising earnings estimates on the back of strong fiscal second-quarter 2013 results. Moreover, this well-known integrated communications and entertainment solutions provider delivered positive earnings surprises in 3 of the last 4 quarters with an average beat of 13.7%. The long-term expected earnings growth rate for this stock is 3.0%.   

Hawaiian Telecom reported second-quarter (ended Jun 30) results on Aug 5. Non-GAAP earnings per share came in at 21 cents, missing the Zacks Consensus Estimate of 25 cents by 16%. The decrease was attributable to a one-time $3.7 million loss on early extinguishment of debt, a $2.5 million increase in depreciation and amortization, and a $2.5 million deferred tax provision. These were partially offset by a one-time $6.5 million gain from the sale of property.

However, revenues for the quarter grew 2.4% year over year to $97 million, driven by video, HSI, and revenues related to the Wavecom acquisition.

Further, the company has been pursuing some strategic acquisitions to strengthen its position in the voice, data and converged services and cloud. Yesterday, Hawaiian Telecom completed the acquisition of SystemMetrics Corporation in a cash transaction valued at approximately $16 million. Prior to this, the company acquired Wavecom Solutions Corporation.    

The Zacks Consensus Estimate for fiscal 2013 increased 32.1% to $1.03 per share as most estimates were revised higher over the last 60 days. For fiscal 2014, more than half of the estimates were revised higher over the same time frame, lifting the Zacks Consensus Estimate by 46.3% to 60 cents per share.

Other Stocks to Consider

Apart from Hawaiian Telecom, other favorably ranked stocks include TALKTALK TELECOM GRO (TKTCY), PortugalTelecom, SGPS S.A. (PT) and Telefonica Brasil, S.A.(VIV). While TALKTALK carries a Zacks #1 Rank (Strong Buy), the latter two carry a Zacks #2 Rank (Buy).

Read the Full Research Report on VIVRead the Full Research Report on PTRead the Full Research Report on TKTCYRead the Full Research Report on HCOMZacks Investment Research
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