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Altice (ATUS) Q3 Earnings Match Estimates, Revenues Up Y/Y

Zacks Equity Research

Altice USA, Inc. ATUS reported healthy third-quarter 2019 financial results, wherein both the top line and the bottom line increased on a year-over-year basis.

Notably, the company made significant progress against its strategic growth initiatives in the reported quarter. These include the launch of Altice Mobile, greater adoption of Altice One, completion of the Suddenlink and Optimum integration through the Billing System Support (BSS)/Operating Support System (OSS) transformation, capital structure simplification, and ongoing construction of its fiber to the home network.

Net Income

Net income for the September quarter was $77.2 million or 12 cents per share compared with $32.6 million or 4 cents per share in the prior-year quarter. The improvement was attributable to higher revenues and lower income tax expense. The bottom line matched the Zacks Consensus Estimate.

Altice USA, Inc. Price, Consensus and EPS Surprise

Altice USA, Inc. Price, Consensus and EPS Surprise

Altice USA, Inc. price-consensus-eps-surprise-chart | Altice USA, Inc. Quote

Revenues

Quarterly total revenues increased 0.9% year over year to $2,438.7 million. This reflects growth in Residential and Business services revenues while decline in News and Advertising revenues. The top line, however, lagged the consensus estimate of $2,488 million.

Residential revenues were $1,955.7 million, up 0.5% year over year, supported by customer relationship growth of 0.7%. Average revenue per user was flat year over year at $143.63 due to timing of previous year rate event.

Revenues from Business services were $357.6 million, up 3.9% with growth in Enterprise & Carrier segment, and SMB. News and Advertising revenues totaled $118.1 million, down 4.7% due to political advertising cycle, offset by revenues from Cheddar and Altice’s advanced advertising platform a4.

Other Details

Despite growth in revenues, operating income declined considerably to $471.5 million from $505.6 million in the year-ago quarter due to higher programming and direct costs, and depreciation and amortization charges. Adjusted EBITDA was $1,068.4 million compared with $1,070.5 million a year ago.

Cash Flow & Liquidity

Operating free cash flow for the quarter was down 5.8% year over year to $693 million, mostly reflecting increased investment in FTTH, new home build, DOCSIS 3.1 and mobile.

Free cash flow was $165.7 million compared with $276.5 million in the year-earlier quarter, partly impacted by the timing of working capital outflow related to the BSS/OSS migration. As of Sep 30, 2019, the company’s net debt was $22,813 million.

Altice repurchased $487 million worth of shares during the quarter, equivalent to an average price of $26.44 per share. On Jul 30, 2019, the company’s board of directors authorized a new incremental three-year share repurchase program of $5 billion, which took effect following completion of the prior $2 billion repurchase program in third-quarter 2019.

2019 Outlook Updated

Altice has lowered its outlook on revenues for full-year 2019. It currently expects revenue growth of about 2.5% year over year (down from prior guidance of 3-3.5% growth). This is based on the initial contribution from Altice Mobile, which is likely to be a key driver of the company’s anticipated accelerated growth in 2020. However, the company has reiterated its guidance for adjusted EBITDA margin, capex and free cash flow growth, along with its leverage target.

Zacks Rank & Stocks to Consider

Altice currently has a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader industry are Verizon Communications Inc. VZ, United States Cellular Corporation USM and ATN International, Inc. ATNI, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Verizon surpassed earnings estimates in each of the trailing four quarters, the average surprise being 2.2%.

U.S. Cellular surpassed earnings estimates twice in the trailing four quarters, the average positive surprise being 13.4%.

ATN International surpassed earnings estimates twice in the trailing four quarters, the average positive surprise being 143.9%.

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