It has been about a month since the last earnings report for Zayo Group (ZAYO). Shares have added about 3.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Zayo Group 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.
Zayo Group Misses Q2 Earnings and Revenue Estimates
Zayo reported lackluster second-quarter fiscal 2019 results, wherein both the top line and bottom line missed the respective Zacks Consensus Estimate.
Quarterly earnings came in at $30.2 million or 13 cents per share compared with $13.2 million or 5 cents per share in the year-earlier quarter. The year-over-year increase in earnings, despite lower revenues, was primarily due to lower operating expenses. The bottom line missed the consensus estimate by a couple of cents.
Revenues decreased to $639.1 million from $653.1 million and missed the Zacks Consensus Estimate of $643 million. Operating income improved to $144.7 million from $103.2 million in the year-ago quarter owing to lower operating expenses. Adjusted EBITDA (earnings before interest, tax, depreciation and amortization) decreased to $321.2 million from $328.9 million.
Revenues from the Fiber Solutions segment totaled $228.7 million, up from $203.4 million in the prior-year quarter. It represented 35.8% of the company's fiscal second-quarter revenues.
The Transport segment generated revenues of $169.8 million compared with $166 million in the year-ago quarter. It represented 26.6% of total revenues in the reported quarter.
The Enterprise Networks segment's revenues were $81.6 million, down from $93.9 million and accounted for 12.8% of the company's quarterly revenues.
Revenues at the Zayo Colocation segment were down to $57.5 million from $59.9 million. It represented 9% of fiscal second-quarter revenues.
The Allstream segment generated revenues of $96.7 million, down 22% year over year and represented 15.1% of total revenues in the reported quarter.
The Other segment's revenues were $4.8 million, down from $6.4 million and accounted for 0.8% of the company's fiscal second-quarter revenues.
Liquidity & Cash Flow
As of Dec 31, 2018, Zayo’s cash and cash equivalents were $176.4 million, with long-term debt of $5,902.6 million. Net cash provided by operating activities for the first six months of fiscal 2019 was $472.4 million compared with $456.7 million a year ago. Adjusted unlevered free cash flow was $132.3 million with $231.8 million borrowing capacity under the revolving credit facility.
During the quarter, the company repurchased 12,967,633 shares at an average price of $31.02.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month. The consensus estimate has shifted 18.02% due to these changes.
Currently, Zayo Group has a subpar Growth Score of D, however its Momentum Score is doing a lot 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.
Zayo Group has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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