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A month has gone by since the last earnings report for Cincinnati Bell (CBB). Shares have added about 0.1% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Cincinnati Bell due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Cincinnati Bell Reports Narrower Q3 Loss, Revenues Rise Y/Y
Cincinnati Bell reported decent third-quarter 2020 results wherein the top line improved year over year. Further, the company’s bottom line beat estimates with narrower-than-expected loss.
On a GAAP basis, net loss for the September quarter was $10.8 million or loss of 21 cents per share compared with net loss of $16.2 million or loss of 32 cents per share in the year-ago quarter. This year-over-year improvement was primarily driven by higher revenues in the reported quarter.
Non-GAAP net loss was $8 million or loss of 16 cents per share compared with net loss of $15.4 million or loss of 31 cents per share in the prior-year quarter. The bottom line was narrower than the Zacks Consensus Estimate of a loss of 25 cents.
Quarterly revenues inched up 1.8% year over year to $389.5 million, primarily driven by a solid traction in IT Services and Hardware segment along with robust demand for fiber despite macroeconomic issues stemming from the coronavirus pandemic.
Revenues from Entertainment and Communications declined 3% year over year to $241 million with Cincinnati contributing $166.8 million and Hawaii $74.2 million to the total top line. Customer attrition from lower margin linear video programming to over-the-top solutions and weak legacy revenues softened revenues in both the markets. Adjusted EBITDA was $88.8 million, down 4.3% from the year-ago quarter.
IT Services and Hardware revenues were $155.2 million compared with $140.5 million in the year-ago quarter. Adjusted EBITDA was $15.6 million in the third quarter, up 26.8% year over year.
Overall operating income was $24.7 million compared with $22.8 million in the year-ago quarter owing to lower operating expenses. Adjusted EBITDA slipped 0.1% to $101.7 million.
Cash Flow & Liquidity
Cincinnati Bell generated $138.9 million of cash from operating activities for the first nine months of 2020 compared with $188.9 million in the prior-year period. As of Sep 30, 2020, the regional telephone company’s non-GAAP net debt totaled $1,949.2 million with cash and cash equivalents of $8.8 million.
Despite COVID-19-induced crisis, Cincinnati Bell is focused on transforming itself from a legacy copper-based telecommunications company to a technology entity with contemporary fiber assets servicing both consumer and business customers with flexible data, video, voice and IP solutions. Equipped with a well-designed marketing program, popular brand value and strong reputation for offering high-quality service, the company expects to increase its Entertainment and Communications revenues. Also, the expansion of its geographic footprint in IT services brought enhanced scale and client diversification, supporting its shift to a hybrid IT solutions provider.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.
Currently, Cincinnati Bell has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Cincinnati Bell has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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