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Windstream Q4 Earnings Meet Estimate, Revenues Miss - Analyst Blog

Zacks Equity Research

Windstream Holdings Inc. (WIN) reported mixed financial results for the fourth quarter of 2014. GAAP net loss was $77.5 million or a loss of 13 cents per share compared with a net income of $118.4 million or 20 cents per share in the year-ago quarter. However, adjusted earnings per share of 3 cents were exactly in line with the Zacks Consensus Estimate.


Windstream Holdings Inc. - Earnings Surprise | FindTheBest

Pro forma revenues decreased 3% year over year to $1,443.1 million in the fourth quarter and also fell short of the Zacks Consensus Estimate of $1,456 million. Total Service revenues fell 2% to $1.400.6 million while Product revenues declined 23% year-over-year to $42.5 million.

Product category wise, Enterprise and small business service revenues were $747 million, remains flat year over year. Consumer broadband service revenues were $121 million, up 1% year over year. Overall consumer service revenues were $316 million, remains flat year over year. Carrier service revenues were $181 million, reflecting a decline of 7% from the year-ago quarter. Wholesale revenues were $104 million, highlighting a decrease of 11% from the prior-year quarter.

Adjusted OIBDA (excluding non-cash pension expense, non-cash stock-based compensation and restructuring charges) was $531.6 million, down 7.7%. Windstream plans to spin off certain assets into an independent, publicly traded real estate investment trust (REIT), which will allow the company to augment network investments, offer improved service and boost shareholder returns. Management expects that the spinoff of the REIT would take place in the second quarter of 2015.

Subscriber Statistics

In the reported quarter, Windstream lost 259,000 voice lines and 10,400 high-speed Internet customers. At the end of 2014, the company had 1.6146 million voice lines, 1.1316 million high-speed Internet customers and 0.3853 million digital TV customers.

Liquidity & Cash Flow

Windstream exited fiscal 2014 with cash and cash equivalents of $27.8 million compared with $48.2 million at the end of 2013. Long-term debt was $8,651.7 million compared with $8,707.2 million at the end of 2013. The debt-to-capitalization ratio, at the end of 2014 was 0.97 against 0.91 at the end of 2013.

During the fourth quarter of 2014, Windstream generated $354.7 million of cash from operations compared with $358.7 million in the year-ago quarter. Free cash flow, in the reported quarter was $120.9 million as against $183.7 million in the prior-year quarter.

Outlook

For fiscal 2015, the company expects total service in the range of a 4% decline to flat year over year. Windstream anticipates capital expenditures in the range of $825–$875 million. The company expects adjusted OIBDA margins, as a percentage of total revenue in the range of 34% to 34.5% for the year.

Zacks Rank

Windstream currently carries a Zacks Rank #3 (Hold). However, some better ranked companies in the same industry include Vonage Holdings Corp. (VG), Telenav Inc. (TNAV) and Level 3 Communications Inc. (LVLT). While Vonage currently sports a Zacks Rank #1 (Strong Buy) both Telenav and Level 3 carry a Zack Rank #2 (Buy).


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