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A month has gone by since the last earnings report for Altice USA, Inc. (ATUS). Shares have lost about 1.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Altice USA, Inc. due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Altice Beats Q4 Earnings Estimates on Higher Revenues
Altice reported solid fourth-quarter 2020 results with the top line and bottom line beating the respective Zacks Consensus Estimate. 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 in 2021.
Net income in the December quarter was $330.5 million or 60 cents per share compared with $0.3 million or breakeven results on per share basis in the prior-year quarter. The improvement was primarily attributable to loss on extinguishment of debt in the prior-year quarter and lower restructuring expenses in the reported quarter. The bottom line surpassed the Zacks Consensus Estimate by 25 cents. In full-year 2020, the company recorded net income of $436.2 million or 75 cents per share compared with $138.9 million or 21 cents per share in 2019.
Fourth-quarter total revenues increased 2.5% year over year to $2,535.4 million on higher Broadband (up 14%) and News & Advertising revenues (up 29.7%). The top line beat the consensus mark of $2,530 million. In full-year 2020, the company recorded total revenues of $9,894.6 million compared with $9,760.8 million in 2019.
The company witnessed robust demand for its broadband service and a 47% year-over-year increase in average data usage per customer to approximately 468 GB per month (roughly 591 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 1.8% year over year to $140.09.
Business Services revenues remained relatively flat at $362.2 million. News and Advertising revenues improved with gradual recovery in local advertising and higher political advertisements.
Operating income improved to $608.7 million from $427.3 million in the year-ago quarter. Adjusted EBITDA was $1,151 million compared with $1,085 million in the prior-year quarter. In the fourth quarter, Altice repurchased 87.3 million shares for an aggregate price of about $3 billion, at an average price of $34.21.
During the quarter, Altice closed the divesture of about 50% of its stake in Lightpath fiber enterprise business for an implied enterprise value of $3.2 billion. The company retains a little more than 50% interest in Lightpath and maintains control of the business.
Cash Flow & Liquidity
In 2020, Altice generated a cash flow of $2,980.2 million compared with $2,554.2 million a year ago. Free cash flow in 2020 was $1,906.2 million compared with $1,198.8 million in 2019. As of Dec 31, 2020, cash and cash equivalents were $278.7 million with net debt of $24,962 million.
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 revenue and adjusted EBITDA growth in 2021 while maintaining leverage and share repurchase targets. The company currently anticipates capital expenditures in 2021 to be within $1.3 billion to $1.4 billion with a year-end leverage target of less than 5.3x.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -17.31% due to these changes.
Currently, Altice USA, Inc. has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Altice USA, Inc. has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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