It has been about a month since the last earnings report for Frontier Communications Corporation FTR. Shares have lost about 18.6% in that time frame, underperforming the market .
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted 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.
Frontier Communications Q1 Loss Wider than Expected
On a GAAP basis, Frontier Communications' net loss in the reported quarter was $129 million or $0.11 per share compared with a net loss of $240 million or $0.21 per share in the prior-year quarter. However, quarterly adjusted (excluding special items) loss per share was $0.08, worse than the Zacks Consensus Estimate of a loss of $0.05.
Total revenue increased a whopping 73.9% year over year to $2,356 million, beating the Zacks Consensus Estimate of $2343.4 million. The significant rise in revenues can primarily be attributable to the acquisition of certain wireline assets from Verizon Communications Inc.
Segment-wise, Customer revenue totaled $2,159 million, up a substantial 81.6% year over year while Switched access and subsidy revenues were $197 million, up 18.7% year over year.
Within the Customer segment, voice services revenues totaled $751 million, up 60.8%, Data and Internet services revenues came in at $993 million, up 69.2%, video revenues were $347 million, soaring an astounding 417.9% and Other revenues totaled $68 million, flat year over year.
Category-wise Residential revenues were $1,164 million, up a massive 99.7% while Business revenues came in at $995 million, up 64.2%.
Operating income in the first quarter increased an astonishing 367.2% year-over-year to $271 million. Quarterly operating expenses were $2,085 million, rising 60.8% year over year. Quarterly adjusted EBITDA was $923 million, up a considerable 74.8% year over year. However, adjusted EBITDA margin was 39.2% compared with 38.9% in the prior-year quarter.
In the first quarter of 2017, Frontier Communications generated $300 million of cash from operations compared with a negative cash generation of $52 million in the prior-year quarter. Free cash flow in the reported quarter was $175 million compared with a negative $45 million in the year-ago quarter.
Frontier Communications exited the first quarter of 2017 with $341 million of cash and cash equivalents compared with $522 million at 2016-end. Total debt at the end of the reported quarter was $17,889 million compared with $17,923 million at the end of 2016. At the end of first-quarter 2017, the debt-to-capitalization ratio was 0.80 compared with 0.79 at the end of 2016.
As of Mar 31, 2017, the number of residential customers decreased 3.2% sequentially to 4,736,000. The average monthly residential revenue per customer was $80.62, up 0.4% sequentially. Residential customer monthly churn was 2.37%, up 13.9% sequentially. Business customers decreased 3.6%, sequentially to 484,000. Frontier Communications had 4,164,000 high-speed broadband subscribers, down 2.5% sequentially and 1,065,000 video customers, down 7% sequentially.
For 2017, Frontier Communications expects adjusted free cash flow in the range of $800–$1,000 million. Capital expenditures will be in the $1,000–$1,250 million range. Cash taxes will be $0–$50 million.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There have been four revisions lower for the current quarter. While looking back an additional 30 days, we can see even more downside. There have been five downward revisions in the last two months. In the past month, the consensus estimate has shifted lower by 33.3% due to these changes.
Frontier Communications Corporation Price and Consensus
Frontier Communications Corporation Price and Consensus | Frontier Communications Corporation Quote
At this time, Frontier Communications' stock has a poor Growth Score of 'F'. However, its Momentum is doing a bit better with a 'D'. 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 'C'. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable solely for value investors based on our style scores.
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We expect in-line returns from the stock in the next few months.
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