Cincinnati Bell Inc (NYSE:CBB): Should The Recent Earnings Drop Worry You?
When Cincinnati Bell Inc (NYSE:CBB) announced its most recent earnings (31 December 2017), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Being able to interpret how well Cincinnati Bell has done so far requires weighing its performance against a benchmark, rather than looking at a standalone number at a point in time. In this article, I’ve summarized the key takeaways on how I see CBB has performed. View our latest analysis for Cincinnati Bell
Was CBB’s recent earnings decline worse than the long-term trend and the industry?
I like to use the ‘latest twelve-month’ data, which either annualizes the most recent 6-month earnings update, or in some cases, the most recent annual report is already the latest available financial data. This blend allows me to analyze different companies in a uniform manner using the latest information. For Cincinnati Bell, its most recent bottom-line (trailing twelve month) is US$24.70M, which compared to the previous year’s figure, has dropped by a large -72.98%. Given that these figures are relatively myopic, I’ve computed an annualized five-year figure for Cincinnati Bell’s earnings, which stands at US$67.38M This doesn’t look much better, since earnings seem to have gradually been diminishing over the longer term.
Why could this be happening? Well, let’s look at what’s transpiring with margins and if the rest of the industry is facing the same headwind. In the last few years, revenue growth has fallen behind earnings, which implies that Cincinnati Bell’s bottom line has been driven by unsustainable cost-cutting. Viewing growth from a sector-level, the US telecom industry has been growing, albeit, at a unexciting single-digit rate of 7.02% in the past year, and 3.64% over the previous five years. This means any tailwind the industry is enjoying, Cincinnati Bell has not been able to realize the gains unlike its average peer.
What does this mean?
Cincinnati Bell’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Generally companies that experience a drawn out period of reduction in earnings are undergoing some sort of reinvestment phase with the aim of keeping up with the recent industry expansion and disruption. I suggest you continue to research Cincinnati Bell to get a better picture of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for CBB’s future growth? Take a look at our free research report of analyst consensus for CBB’s outlook.
2. Financial Health: Is CBB’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 31 December 2017. This may not be consistent with full year annual report figures.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
