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Windstream Holdings Inc. (WIN - Analyst Report) reported quarterly adjusted earnings per share of 9 cents, in line with the Zacks Consensus Estimate and higher than 2 cents earned in the year-ago quarter. Earnings for the year increased 43% year over year to 40 cents per share.

Pro forma revenues decreased 3% year over year to $1,491.3 million in the fourth quarter and was below the Zacks Consensus Estimate of $1,501.0 million. Pro forma revenues for the year were $6 billion, down 2% year over year.

Total Service revenues fell 3%, while Product revenues grew 2% year over year in the fourth quarter.

Adjusted OIBDA (excluding non-cash pension expense, non-cash stock-based compensation and restructuring charges) was $576 million in the fourth quarter and $2.32 billion in 2013, down 7% and 3%, respectively.

Subscriber Statistics

During the fourth quarter, total access lines, which include voice lines, high-speed Internet and digital television customers, decreased 5% year over year to $3.30 million. Voice lines and digital television customers witnessed a year-over-year decline of 6.0% each, while high-speed Internet fell 4.0%.


Windstream exited the year with cash and cash equivalents of $48.2 million compared with $132.0 million in 2012. Long-term debt and capital lease obligations were $8,662.2 million compared with $8,099.8 million at the end of 2012.

In 2013, the company generated adjusted free cash flow of $891.0 million and capital expenditure was $170.0 million in the fourth quarter.

The company paid dividend of $594 million in 2013, representing as payout ratio of 67%.


For 2014, the company expects total revenue of down 2.5% to up 1% compared to 2013. Adjusted OIBDA margin is expected at 38% in 2014 driven by the company’s expense management initiatives.

Adjusted capital expenditures are expected in the range of $800–$850 million, including the estimated $85 million in incremental fiber-to-the-tower and broadband stimulus investments.

In addition, the company expects cash tax expense of less than $30 million and less than $200 million in 2014 and 2015, respectively. For 2014, the company expects adjusted free cash flow of $775–$885 million, resulting in a dividend payout ratio ranging from 68% to 78%.

Our Analysis and Zacks Rank

Windstream, which operates with other telecom company like Frontier Communications (FTR - Analyst Report) has a Zacks Rank #3 (Hold). While the company continues gain from the traction in the broadband market, we believe that a competitive market scenario, continuous access line loss, regulatory issues and constant upgrades in the technological scenario will impede its growth.

Other Stocks

Stocks worth considering within the same sector include Inteliquent, Inc. (IQNT - Snapshot Report) and Meru Networks, Inc. (MERU - Snapshot Report).  Both currently carry a Zacks Rank #2 (Buy).

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