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What Awaits Frontier Communications (FTR) in Q1 Earnings?

Zacks Equity Research

Frontier Communications Corporation FTR, a leading regional telecommunication company in the U.S., is scheduled to report first-quarter 2017 results on May 2, after market close.

Last quarter, the bottom line of Frontier Communications missed the Zacks Consensus Estimate by 33.33%. However, the company’s bottom line surpassed the Zacks Consensus Estimate in two of the past four quarters, resulting in an average beat of 34.45%.

Over the past three months, shares of Frontier Communications lost 45.00% compared with the Zacks categorized Wireline - Regional - Rural industry’s loss of 20.00%.

Let’s see how things are shaping up for this announcement.

Factors at Play

Frontier Communications has been facing numerous issues such as outages, poor telephone services and billing problems. The company continues to suffer from the loss of legacy fixed telephony business to wireless and decline in access lines and wireless backhaul revenues due to customer migration to Ethernet solutions at lower price points.

However, we are impressed with Frontier Communications’ focus on generating more profits through customer retention, market share gain, product introductions, broadband expansion, and improved sales and marketing initiatives. The company has been trying to derive benefits from the growing Business Service Segment. Frontier Communications’ Vantage TV service rollout in North Carolina is likely to leverage from its recent acquisition of Verizon Communications’ wireline assets in the state. By foraying into North Carolina, Frontier Communications will challenge major incumbents like AT&T Inc. T and Charter Communications CHTR.

Meanwhile, the company’s decision to reward its stockholders with a quarterly cash dividend of $0.105 per share of common stock, paid on Mar 31, 2017 to holders of record at the close of business on Mar 15, 2017, was encouraging.

Earnings Whispers

Our proven model does not conclusively show a beat for FrontierCommunications this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here as elaborated below.

Zacks ESP: Frontier Communications has an Earnings ESP of -40.00%. This is because the Most Accurate estimate is pegged at a loss of 7 cents, while the Zacks Consensus Estimate is pegged at a loss of 5 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Frontier Communications has a Zacks Rank #3 which increases the predictive power of ESP. However, the company’s negative ESP makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Frontier Communications Corporation Price and EPS Surprise


Frontier Communications Corporation Price and EPS Surprise | Frontier Communications Corporation Quote

Stock to Consider

Here is a company in the Zacks categorized broader Utilities sector – which houses Frontier Communications – that has the right combination of elements to post an earnings beat this quarter.

PPL Corporation PPL is expected to report first-quarter 2017 results on May 4. It has an Earnings ESP of +1.61% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

PPL Corp’s earnings surpassed the Zacks Consensus Estimate in three of the previous four quarters, with an average beat of 4.29%.

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