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Zayo Boosts Ohio Footprint Through Fiber Network Expansion

Zacks Equity Research

Zayo Group Holdings, Inc. ZAYO recently augmented its presence in Ohio with the expansion of the company’s fiber network infrastructure in the region. The strategic move will enable the company to provide high-quality connectivity in order to support the seamless transition of enterprise and mobile carrier customers to 5G technology.

The network expansion will add about 300 new route miles for Zayo in the Youngstown and Akron area, and complement its existing networks. The expanded network is expected to benefit regional business and enterprise customers with superior bandwidth facility for data-intensive content, streaming services and IoT applications. The densification of the fiber network will further help the company offer improved long-haul connectivity throughout the state, including the Cleveland/Akron/Pittsburgh corridor.

Zayo expects construction work for the network expansion project to be completed within the next year, with the initial work starting in the ongoing quarter. The expanded fiber network will extend its coverage footprint to approximately 3,500 route miles, including connections to multiple on-net buildings and data centers in Cleveland, Cincinnati, Columbus and Toledo.

Zayo is well poised to benefit from a diversified blue-chip customer base that comprises the largest and most sophisticated users of bandwidth. It aims to grow the network business at 5% and beyond while controlling expenses to boost OpEx efficiency. The company emphasizes on less than 12-month payback deals while leaning into strategic investments like e-rate deals, mobile infrastructure and long-haul fiber. Such deals leverage its existing assets in conjunction with new builds. These are likely to deliver strong free cash flow yields and attractive returns on invested capital.

Management is bullish about the prospects of its largest business segment, Fiber Solutions, as it is witnessing a very strong deal momentum. We also remain impressed with the inherent growth potential of this Zacks Rank #3 (Hold) stock. Year to date, the stock has outperformed the industry with an average return of 43.1% compared with the 31.3% rise of the latter.



Some better-ranked stocks in the industry are ADTRAN Inc. ADTN, sporting a Zacks Rank #1 (Strong Buy), and Bandwidth Inc. BAND and Motorola Solutions, Inc. MSI, carrying a Zacks Rank #2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

ADTRAN has long-term earnings growth expectation of 5%. It surpassed earnings estimates thrice in the trailing four quarters, the average positive surprise being 114.1%.        
 
Bandwidth has a long-term earnings growth expectation of 10%. It beat earnings estimates in each of the last four quarters, the average positive surprise being 115.7%.  
       
Motorola has a long-term earnings growth expectation of 7.7%. It beat earnings estimates in each of the preceding four quarters, the average surprise being 9.1%.

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