A month has gone by since the last earnings report for Windstream Holdings, Inc. . Shares have lost about 9.2% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Windstream Reports Wider-than-Expected Loss in Q1
Total revenue declined 1% year over year to $1,365.7 million in the first quarter, missing the Zacks Consensus Estimate of $1,537.6 million. Service revenues increased 0.3% year over year to $1,344.4 million and Product revenues plunged 35% to $21.3 million.
In the reported quarter, total operating expense was $1,319.7 million, up 9% year over year. Operating income was $46 million compared with $157.7 million in the prior-year quarter. Adjusted OIBDA (operating income before depreciation and amortization) was $335 million, down 12% year over year.
Cash Flow
In the first quarter of 2017, Windstream generated $132.5 million of cash from operations compared with $127.2 million in the prior-year quarter. In the reported quarter, adjusted free cash flow was $56.9 million compared with a negative $97 million in the year-ago quarter.
Liquidity
Windstream exited the first quarter of 2017 with $51.5 million of cash and cash equivalents and $5,479.1 million of total debt compared with $59.1 million and $4,863.3 million, respectively, at the end of 2016. At the end of the reported quarter, the debt-to-capitalization ratio was 0.88 compared with 0.97 at the end of 2016.
Segment-Wise Information
Consumer & Small Business – CLEC: Revenues totaled $140.3 million, up 9% year over year. Segment profit was $48.8 million, up 18%.
Wholesale: Revenues came in at $157.5 million, down 3% year over year. Segment profit was $107.5 million, down 9%.
Enterprise: Total revenue was $525.5 million, up 2% year over year. Of the total, Service revenues were $515.9 million, up 5%. Product sales were $9.6 million, down a significant 56%. Total profit for the segment was $82.5 million, up 17%.
Subscriber Statistics
In the reported quarter, for ILEC segment, Windstream lost 3,500 high-speed Internet customers and 17,100 household subscribers, both were up 13% year over year. Moreover, at the end of the first quarter of 2017, the company had 1.3375 million household customers, down 7%. High-speed Internet customer base was 1.0476 million, down 4% while the digital TV customer base was 0.3106 million, down 11%. ILEC small business customers totaled 0.133 million, down 8%.
Enterprise customers were 0.0353 million, down 2% year over year. CLEC consumer customers were 0.6474 million, down 7% and CLEC small business customers were 0.0955 million, down 21%.
Outlook
For 2017, Windstream expects total service revenues to be in line with full year 2016. The company projects capital expenditure in the band of $790–$840 million. Adjusted OIBDAR is anticipated at around $2,000 – $2,060 million. Management expects to generate around $200 million of free cash flow in 2017.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There have been two revisions lower for the current quarter. In the past month, the consensus estimate has shifted lower by 9.4% due to these changes.
Windstream Holdings, Inc. Price and Consensus
VGM Scores
At this time, Windstream's stock has a subpar Growth Score of 'D'.It also lags on the momentum front with an 'F'. However, the stock was allocated a grade of 'A' on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'C'. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable solely for value investors based on our style scores.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We expect in-line returns from the stock in the next few months.
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Why Is Windstream (WIN) Down 9.2% Since the Last Earnings Report?
A month has gone by since the last earnings report for Windstream Holdings, Inc. . Shares have lost about 9.2% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Windstream Reports Wider-than-Expected Loss in Q1
Total revenue declined 1% year over year to $1,365.7 million in the first quarter, missing the Zacks Consensus Estimate of $1,537.6 million. Service revenues increased 0.3% year over year to $1,344.4 million and Product revenues plunged 35% to $21.3 million.
In the reported quarter, total operating expense was $1,319.7 million, up 9% year over year. Operating income was $46 million compared with $157.7 million in the prior-year quarter. Adjusted OIBDA (operating income before depreciation and amortization) was $335 million, down 12% year over year.
Cash Flow
In the first quarter of 2017, Windstream generated $132.5 million of cash from operations compared with $127.2 million in the prior-year quarter. In the reported quarter, adjusted free cash flow was $56.9 million compared with a negative $97 million in the year-ago quarter.
Liquidity
Windstream exited the first quarter of 2017 with $51.5 million of cash and cash equivalents and $5,479.1 million of total debt compared with $59.1 million and $4,863.3 million, respectively, at the end of 2016. At the end of the reported quarter, the debt-to-capitalization ratio was 0.88 compared with 0.97 at the end of 2016.
Segment-Wise Information
Consumer & Small Business – CLEC: Revenues totaled $140.3 million, up 9% year over year. Segment profit was $48.8 million, up 18%.
Wholesale: Revenues came in at $157.5 million, down 3% year over year. Segment profit was $107.5 million, down 9%.
Enterprise: Total revenue was $525.5 million, up 2% year over year. Of the total, Service revenues were $515.9 million, up 5%. Product sales were $9.6 million, down a significant 56%. Total profit for the segment was $82.5 million, up 17%.
Subscriber Statistics
In the reported quarter, for ILEC segment, Windstream lost 3,500 high-speed Internet customers and 17,100 household subscribers, both were up 13% year over year. Moreover, at the end of the first quarter of 2017, the company had 1.3375 million household customers, down 7%. High-speed Internet customer base was 1.0476 million, down 4% while the digital TV customer base was 0.3106 million, down 11%. ILEC small business customers totaled 0.133 million, down 8%.
Enterprise customers were 0.0353 million, down 2% year over year. CLEC consumer customers were 0.6474 million, down 7% and CLEC small business customers were 0.0955 million, down 21%.
Outlook
For 2017, Windstream expects total service revenues to be in line with full year 2016. The company projects capital expenditure in the band of $790–$840 million. Adjusted OIBDAR is anticipated at around $2,000 – $2,060 million. Management expects to generate around $200 million of free cash flow in 2017.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There have been two revisions lower for the current quarter. In the past month, the consensus estimate has shifted lower by 9.4% due to these changes.
Windstream Holdings, Inc. Price and Consensus
Windstream Holdings, Inc. Price and Consensus | Windstream Holdings, Inc. Quote
VGM Scores
At this time, Windstream's stock has a subpar Growth Score of 'D'.It also lags on the momentum front with an 'F'. However, the stock was allocated a grade of 'A' on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'C'. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable solely for value investors based on our style scores.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We expect in-line returns from the stock in the next few months.