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Windstream Corporation (WIN - Analyst Report) reported weak second-quarter 2013 results due to voice and digital television subscriber loss and reduced intrastate access rates. These were partially offset by strong strategic revenues and data and integrated service revenues.

Quarterly adjusted earnings per share of 7 cents were below the Zacks Consensus Estimate of 9 cents. Comparing with the prior-year quarter, the results dropped 41.7% from 12 cents.

Pro forma revenues decreased 1.8% year over year to $1,506.1 million in the second quarter and was below the Zacks Consensus Estimate of $1,512.0 million. Total service revenue and Product sales fell 1.31% and 13.8% year over year, respectively.

Adjusted OIBDA (excluding non-cash pension expense, non-cash stock-based compensation and restructuring charges) was $582.3 million in the second quarter compared with $590.6 million in the year-ago quarter.

Subscriber Statistics

During the second quarter, total access lines, which include voice lines, high-speed Internet and digital television customers, decreased 4.0% year over year to $3.39 million. Voice lines and digital television customers witnessed a year-over-year decline of 5.5% and 4.9%, respectively, while high-speed Internet fell a marginal 1.3%.

Liquidity

Windstream exited the second quarter with cash and cash equivalents of $78.3 million compared with $132.0 million at the end of 2012. Long-term debt and capital lease obligations were $8,867.9 million compared with $8,099.8 million at the end of 2012.

For the second quarter, the company generated adjusted free cash flow of $170.0 million and capital expenditure was $220.5 million.

Guidance

For full-year 2013, Windstream expects total revenue to decline 1-3% as compared to 2012 mainly due to softer business sales environment and continuous pressure in the carrier transport business. The company expects adjusted OIBDA to remain in the range of negative 3% to positive 1% as compared to 2012. Adjusted capital expenditure is expected to be of $815 million to $830 million and adjusted free cash flow of $860-$960 million. 

Our Analysis

We believe that a competitive market scenario, continuous access line loss, regulatory issues and constant upgrades in the technological scenario will impede the company’s growth

Other Stocks

Other telecom companieslike Frontier Communications (FTR - Analyst Report) and Century Link Inc. (CTL - Analyst Report), reported second-quarter results on Aug 7, 2013, after the market closed. Frontier’s adjusted earnings of 6 cents were in line with the Zacks Consensus Estimate, while CenturyLink’s adjusted earnings of 69 cents were ahead of the Zacks Consensus Estimate of 67 cents.

Windstream currently carries a Zacks Rank #4 (Sell). Other stocks worth considering within the same sector is Cincinnati Bell (CBB - Analyst Report), which currently carries a Zacks Rank #1 (Strong Buy).

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