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Altice (ATUS) Tops Q3 Earnings Estimates, Misses on Revenues

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Zacks Equity Research
·5 min read
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Altice USA, Inc. ATUS reported relatively modest third-quarter 2020 results with the bottom line beating the Zacks Consensus Estimate and the top line missing the same. Despite a challenging macroeconomic environment, the company recorded solid customer additions, driven by resilience in the business model, and is likely to continue witnessing this growth momentum for the rest of the year.

Bottom Line

Net loss for the September quarter was $4.7 million or loss of 1 cent per share against net income of $77.2 million or 12 cents in the prior-year quarter. The deterioration can be primarily attributable to loss on extinguishment of debt. Excluding non-recurring items, adjusted earnings for the reported quarter were 34 cents per share, which beat the Zacks Consensus Estimate by 11 cents.

Altice USA, Inc. Price, Consensus and EPS Surprise

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

Third-quarter total revenues decreased marginally to $2,434 million from $2,438.7 million in the year-earlier quarter as higher broadband revenues were more than offset by lower video and telephony business sales. Residential revenues were down 1.6% while Business Services and News and Advertising revenues improved 1.3% and 5.2%, respectively. The top line missed the consensus mark of $2,473 million.

The company witnessed robust demand for its broadband service for the third consecutive quarter. Altice witnessed a 44% year-over-year increase in average data usage per customer to approximately 420 GB per month (roughly 530 GB per month for broadband-only customers). The company has accelerated the deployment of 1-gig speeds, which are currently available in more than 92% of its geographical footprint. Residential revenue per customer relationship declined 3.8% year over year to $138.16.

Business Services witnessed 2.6% growth in Enterprise & Carrier revenues and 0.8% in SMB, with higher demand for broadband speed upgrade for remote working and secured Internet solutions. News and Advertising revenues improved with gradual recovery in local advertising and higher political advertisements.

Other Details

Operating income improved to $549.3 million from $471.5 million in the year-ago quarter. Adjusted EBITDA was $1,126.7 million compared with $1,068.4 million in the prior-year quarter. In the third quarter, Altice repurchased 17 million shares for an aggregate price of about $449 million, at an average price of $26.45.

During the quarter, Altice inked an agreement to divest about 50% of its stake in Lightpath fiber enterprise business for an implied enterprise value of $3.2 billion. The company will receive total gross cash proceeds of $2.3 billion from the sale and related financing activity. It will retain a little more than 50% interest in Lightpath and maintain control of the business.

In addition, Altice completed the acquisition of regional cable operator, Service Electric Cable T.V. of New Jersey, Inc. Covering almost the entire length and breadth of the county, Service Electric Cable offers cable, telephone and Internet services to about 30,000 local customers. With coveted assets that boast attractive broadband growth opportunities, the transaction provides Altice a much-needed boost to cement its regional presence.

Cash Flow & Liquidity

For the first nine months of 2020, Altice generated a cash flow of $2,188.7 million compared with $1,834 million in the prior-year period. Free cash flow for the first nine months of 2020 was $1,459.3 million compared with $801.4 million in the year-ago period. As of Sep 30, 2020, cash and cash equivalents were $119 million with net debt of $23,229 million.

2020 Outlook Reinstated

Altice expects the macroeconomic impact from the COVID-19 pandemic to affect its operations, particularly in News and Advertising, and SMB businesses. Although this lowers revenues and EBITDA visibility, the company remains confident of its ability to deliver free cash flow growth in 2020 while maintaining leverage and share repurchase targets. The company currently anticipates capital expenditures in 2020 to be below $1.3 billion, with growth in revenues and adjusted EBITDA. It maintains a year-end leverage target of 4.5x-5.0x.

Zacks Rank & Other Stocks to Consider

Altice currently has a Zacks Rank #2 (Buy). Some other top-ranked stocks in the industry are Corning Incorporated GLW, sporting a Zacks Rank #1 (Strong Buy), and Viavi Solutions Inc. VIAV and Knowles Corporation KN, each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Corning has a long-term earnings growth expectation of 2.4%. It delivered a positive earnings surprise of 40.7%, on average, in the trailing four quarters.

Viavi delivered a positive earnings surprise of 17.5%, on average, in the trailing four quarters.

Knowles has a long-term earnings growth expectation of 10%. It delivered a positive earnings surprise of 12.5%, on average, in the trailing four quarters.

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