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Altice USA, Inc. ATUS reported solid third-quarter 2021 results with the bottom line and the top line surpassing the respective Zacks Consensus Estimate. Accretive fiber buildouts, network upgrades, and strategic acquisitions on the back of a resilient business model acted as catalysts during the quarter.
Net income attributable to shareholders in the September quarter was $266.9 million or 58 cents per share against a net loss of $4.7 million or a loss of 1 cent per share in the prior-year quarter. The year-over-year improvement was primarily due to top-line growth and lower operating expenses in the reported quarter. The bottom line surpassed the Zacks Consensus Estimate by 8 cents.
Altice USA, Inc. Price, Consensus and EPS Surprise
Altice USA, Inc. price-consensus-eps-surprise-chart | Altice USA, Inc. Quote
Third-quarter total revenues increased 5.8% year over year to $2,574.9 million, primarily due to higher revenues from business services and wholesale (up 21.7%) and news and advertising (up 15.6%). The top line beat the consensus estimate of $2,507 million.
The company witnessed solid demand for its broadband service with more than 50% of customers sticking to plans with download speeds of 200 Mbps or less. In the reported quarter, broadband-only customer usage averaged 558 GB per month. The company has accelerated the deployment of 1-gig services with 13.3% of the total customer base currently availing Gigabit speeds. This represents a significant growth opportunity for the company. Residential revenue per customer relationship improved 1.9% year over year to $140.73.
Business services and wholesale revenues were up to $440.8 million as business activity gained momentum. The upside was further driven by higher average recurring broadband revenue per SMB customer. With businesses picking up pace post the COVID-19 lockdown, bolstered vaccination efforts and moderate operational constraints supported SMB customer quarterly net additions in the last four years. News and Advertising revenues surged to $143.6 million, primarily fueled by strength across local, regional, and national advertising revenues.
The company covered nearly 1.3 million households with FTTH (fiber-to-the-home) technology at the end of the reported quarter. With an optimistic outlook, Altice USA is committed to accelerating its future FTTH deployment initiatives and enhancing both CAPEX and OPEX efficiencies following the completion of its FTTH build, supported by improved customer experience.
Operating income improved to $690.6 million from $549.3 million in the year-ago quarter. Adjusted EBITDA was $1,164.8 million compared with $1,126.7 million in the prior-year quarter. In the third quarter, Altice repurchased 2.6 million shares for an aggregate price of about $79.4 million, at an average price of $30.63.
Cash Flow & Liquidity
In the first nine months of 2021, Altice generated $2,177.5 million of net cash from operating activities compared with $2,188.7 million in the prior-year period. Free cash flow in the quarter came in at $389.1 million compared with $457.5 million in the prior-year quarter. As of Sep 30, 2021, cash and cash equivalents totaled $232.7 million with net debt of $24,927 million.
2021 Outlook Updated
Despite adversities stemming from the COVID-19 pandemic, Altice remains confident of its ability to deliver revenue and adjusted EBITDA growth in 2021 while maintaining leverage and share repurchase targets. It expects growth in revenues and adjusted EBITDA with continuous network upgrades, increased customer penetration with new build-out and affordable broadband plans with great flexibility. The company currently anticipates capital expenditures for 2021 to be $1.3 billion to $1.4 billion with a year-end leverage target of less than 5.4x net debt.
Zacks Rank & Stocks to Consider
Altice currently has a Zacks Rank #4 (Sell). Some better-ranked stocks in the industry are Harmonic Inc. HLIT, sporting a Zacks Rank #1 (Strong Buy), and Arista Networks, Inc. ANET and SeaChange International, Inc. SEAC, both carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Harmonic has a long-term earnings growth expectation of 15%. It delivered an earnings surprise of 61.1%, on average, in the trailing four quarters.
Arista has a long-term earnings growth expectation of 16.7%. It delivered an earnings surprise of 6%, on average, in the trailing four quarters.
SeaChange has a long-term earnings growth expectation of 10%. It delivered an earnings surprise of 28.9%, on average, in the trailing four quarters.
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