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What Awaits Windstream Holdings (WIN) in Q2 Earnings?

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Windstream Holdings Inc. , a leading rural local exchange carrier in the U.S., is scheduled to report second-quarter 2016 numbers on Aug 4, before the opening bell.

Last quarter, the company posted a positive earnings surprise of 57.41%. Moreover, the company’s earnings surpassed the Zacks Consensus Estimate in all of the previous four quarters, with an average beat of 135.19%. Let’s see how things are shaping up for this announcement.

WINDSTREAM HLDG Price and EPS Surprise

WINDSTREAM HLDG Price and EPS Surprise | WINDSTREAM HLDG Quote

Factors Likely to Influence this Quarter

Windstream is poised for long-term growth, thanks to its investments in fiber-to-the tower and broadband networks and effective cost management.Meanwhile, the launch of the cloud-to-cloud disaster recovery management solutions and Cloud Connect Solution should result in increased market traction for the company. Also, Windstream has completed network upgrades in 15 states to boost Internet speeds to a maximum of 100 megabits-per-second (Mbps) for residential and small business customers across 1,000 markets. Windstream also aims to deliver broadband speeds of up to 1 gigabit per second (Gbps) with the help of the merged Calix Inc.’s (CALX - Free Report) E3-16F G.fast sealed DPU nodes and GigaFamily products. Windstream’s strategic moves to boost sales, cost-cutting initiatives and pricing plans should also drive revenues and margins.

On the flip side, Windstream has been losing access lines due to pricing pressure and fierce competition. The implementation of stringent regulatory measures by the FCC compels companies such as Windstream to cut rates for customers. Further, continuous investments in technology and network upgrades may dent the company’s earnings.

Earnings Whispers

Our proven model does not conclusively show that Windstream is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here as elaborated below.

Zacks ESP: Windstream has an earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at a loss of 43 cents.

Zacks Rank: Windstream has a Zacks Rank #2 which increases the predictive power of ESP. However, the company’s 0.00% ESP makes surprise prediction difficult.

Meanwhile, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stocks to Consider

Here are some companies that you may consider instead as our model shows that they have the right combination of elements to post an earnings beat this quarter.

CDK Global, Inc. , with an earnings ESP of +4.26% and a Zacks Rank #1.

MeetMe Inc. , with an earnings ESP of +33.33% and a Zacks Rank #2.

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Calix, Inc (CALX) - free report >>

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