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It has been about a month since the last earnings report for Altice USA, Inc. (ATUS). Shares have lost about 0.6% 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’s Q1 Earnings Top Estimates, Revenues Miss
Altice reported mixed first-quarter 2021 results with the bottom line beating the Zacks Consensus Estimate but the top line missing the same. Despite a challenging macroeconomic environment, the company recorded higher broadband revenues and solid customer additions. Driven by a resilient business model, this growth momentum is likely to continue in 2021.
Net income in the March quarter was $274.1 million or 58 cents per share against net loss of $0.9 million or breakeven per share in the prior-year quarter. The improvement was primarily attributable to loss on investments and sale of affiliate interests in the prior-year quarter and lower operating expenses in the reported quarter. The bottom line surpassed the Zacks Consensus Estimate by 29 cents.
First-quarter total revenues increased 1.2% year over year to $2,478.8 million, primarily on higher Broadband revenues (up 9.6%), accompanied by accretive customer base. However, the top line missed the consensus mark of $2,506 million.
The company witnessed solid demand for its broadband service and a 39% year-over-year increase in average data usage per customer. In the reported quarter, broadband-only customer usage averaged 613 GB per month. The company has accelerated the deployment of 1-gig services, which are currently available in more than 92% of its geographical footprint. Residential revenue per customer relationship declined 0.8% year over year to $142.24 from $143.39.
Business Services revenues improved 0.7% to $367.2 million as a result of Lightpath’s healthy momentum in the education and healthcare verticals, driven by elevated connectivity requirements during the pandemic. Meanwhile, News and Advertising revenues remained relatively flat with gradual recovery in local and regional advertising.
Notably, the company covered more than 1 million households with FTTH technology at the end of the reported quarter. With an optimistic outlook, Altice USA is committed to accelerating its future FTTH deployment initiatives and enhancing both CAPEX and OPEX efficiencies following the completion of its FTTH build, supported by improved customer experience.
Operating income improved to $608.5 million from $448.6 million in the year-ago quarter. Adjusted EBITDA was $1,074.8 million compared with $1,031.4 million in the prior-year quarter. In the first quarter, Altice repurchased 15.2 million shares for an aggregate price of about $522.7 million, at an average price of $34.43.
Cash Flow & Liquidity
For the first three months of 2021, Altice generated $749.6 million of net cash from operating activities compared with $593.6 million in the prior-year period. Free cash flow in the first three months of 2021 was $536.8 million compared with $294.5 million in the year-ago period. As of Mar 31, 2021, cash and cash equivalents were $220.8 million with net debt of $24,905 million.
2021 Outlook Restated
Despite adversities stemming from the COVID-19 pandemic, Altice 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 an upward trend in fresh estimates. The consensus estimate has shifted 21.02% due to these changes.
At this time, Altice USA, Inc. has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile 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 trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Altice USA, Inc. has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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