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Liberty Global (LBTYA) Down 9.5% Since Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for Liberty Global PLC (LBTYA - Free Report) . Shares have lost about 9.5% in that time frame.
Will the recent negative trend continue leading up to its next earnings release, or is LBTYA due for a breakout? Before we dive into how investors and analysts have reacted as 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.
Recent Earnings
Liberty Global reported first-quarter 2018 loss of $1.47 per share significantly wider than year-ago quarter loss of 35 cents. The Zacks Consensus Estimate for earnings was pegged at 8 cents per share.
Revenues on a reported basis rose 18.4% year over year to $4.16 billion, which comfortably surpassed the Zacks Consensus Estimate of $4.10 billion. On a rebased basis, revenues increased 4.2% from the year-ago quarter.
Top-line growth was driven by 8.7% increase in revenues from Germany and 5.2% increase in Virgin Media revenues. Recently, Liberty launched its first gigabit broadband service powered by Docsis 3.1 technology in Bochum, Germany.
Acquisitions/Divestitures
Liberty now expects its previously announced sale of UPC Austria for €1.9 billion to TMobile Austria to close in the second half of 2018.
In March, the company also announced the termination of its planned purchase of Multimedia Polska.
Liberty also announced the divestiture of its operations in Germany, Hungary, Romania and the Czech Republic to Vodafone for a total enterprise value of approximately €19.0 billion ($22.7 billion).
Revenue Details
Residential cable revenues increased 2.8% year over year to $3.1 billion. Residential mobile revenues (including interconnect and handset sales) were $0.4 billion, up 4.5%.
Moreover, B2B revenues (including SOHO and non-subscription revenues) increased 12.4% from the year-ago quarter to $0.6 billion.
Liberty added 66K subscribers (organic RGUs) during the quarter, down 72.9% from the year-ago quarter due to lower net additions across most European operations. ARPU per cable customer relationships increased 15.2% to $46.04. On a rebased basis, growth was 1.3%.
U.K./Ireland RGU additions were almost 45K, down from 158K in the year-ago quarter. Revenues on a reported basis increased 18.3% year over year to $1.78 billion. On a rebased basis, revenues climbed 5.2%.
RGU attrition in Belgium was 22K, reflecting negative impacts of stiff competition. However, the company’s converged quad-play package additions continued to grow in the quarter. Liberty gained 30K new "WIGO" subscribers during the reported quarter.
Belgium revenues on a reported basis increased 15.1% year over year to $759.6 million. On a rebased basis, revenues decreased 1.3%.
Germany RGU additions were almost 29K, down from 52.4K in the year-ago quarter, primarily owing to higher video attrition. Moreover, broadband and fixed-line telephony net additions were impacted by churn from price increases implemented in the quarter.
Germany revenues on a reported basis surged 25.4% year over year to $782.8 million. On a rebased basis, revenues increased 8.7%.
Switzerland/Austria RGU attrition was almost 34.7K, primarily hurt by intensifying competition. Revenues on a reported basis increased 7.5% year over year to $454.6 million. On a rebased basis, revenues decreased 0.4%.
Central and Eastern Europe RGU additions were 48.7K, slightly better than 48.3K in the year-ago quarter. Revenues on a reported basis surged 22.2% year over year to $330.8 million. On a rebased basis, revenues increased 4.3%.
Liberty added 201K subscribers to its next-generation video platforms (including Horizon TV, Horizon-Lite, TiVo, Virgin TV V6 and Yelo TV) and reached 7.9 million or 45% of the company’s total cable video base (excluding DTH) by the end of the reported quarter.
Liberty also deployed 800K latest WiFi connect box. Its installed base reached almost 7.3 million or 48% of broadband subscribers across Europe.
In mobile, the company added 52K subscribers. Mobile ARPU (including interconnect revenues) on a reported basis, increased 7.2% to $18.33. On a rebased basis, the figure declined 2.6%.
Further, mobile ARPU (excluding interconnect revenues) on a reported basis increased 6.6% to $14.69. On a rebased basis, the figure declined 3.5%.
Operating Details
In the first quarter, programming and other direct costs of services soared 23.5% from the year-ago quarter to $1 billion.
Depreciation & amortization (D&A) expenses increased 14.9% to $1.29 billion. Selling, general & administrative (SG&A) expenses were $691.9 million, up 11.7% from the year-ago quarter.
Operating income increased 17.5% from the year-ago quarter to $493.1 million. However, operating margin contracted 10 basis points (bps) to 11.9%.
Segment operating cash flow (operating income after adjusted for non-cash items) increased 19.2% year over year to $1.89 billion.
U.K./Ireland operating cash flow (OCF) on a reported basis increased 18.6% year over year to $762.6 million. On a rebased basis, OCF increased 5.5%.
Belgium OCF on a reported basis increased 20.6% year over year to $357.6 million. On a rebased basis, OCF increased 2.5%.
Germany OCF on a reported basis surged 29.1% year over year to $492.1 million. On a rebased basis, OCF increased 11.8%.
Switzerland/Austria OCF on a reported basis declined 3.4% year over year to $243.5 million. On a rebased basis, OCF decreased 10.4%.
Finally, Central and Eastern Europe OCF on a reported basis surged 25.4% year over year to $139.1 million. On a rebased basis, OCF increased 6.3%.
Balance Sheet & Cash Flow
As of Mar 31, 2018, Liberty Global had $554.9 million cash and cash equivalents compared with $1.67 billion as of Dec 31, 2017.
Cash provided by operating activities were $1.28 billion, while free cash outflow was $625.1 million.
Liberty bought nearly $500 million of stock in the reported quarter. The company remains on track to repurchase a total of $2 billion this year.
2018 Guidance
Liberty Global expects to deliver approximately 5% rebased OCF growth. Adjusted free cash flow is estimated to be around $1.6 billion. Property and equipment additions are projected to be $5.1 billion for the full year. The investments highlight the company's customer-friendly attitude and bode well for its growth prospects.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.
At this time, LBTYA has a nice Growth Score of B, though it is lagging a bit on the momentum front with a C. The stock was also allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is more suitable for growth investors than those looking for value and momentum.
Outlook
LBTYA has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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Liberty Global (LBTYA) Down 9.5% Since Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Liberty Global PLC (LBTYA - Free Report) . Shares have lost about 9.5% in that time frame.
Will the recent negative trend continue leading up to its next earnings release, or is LBTYA due for a breakout? Before we dive into how investors and analysts have reacted as 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.
Recent Earnings
Liberty Global reported first-quarter 2018 loss of $1.47 per share significantly wider than year-ago quarter loss of 35 cents. The Zacks Consensus Estimate for earnings was pegged at 8 cents per share.
Revenues on a reported basis rose 18.4% year over year to $4.16 billion, which comfortably surpassed the Zacks Consensus Estimate of $4.10 billion. On a rebased basis, revenues increased 4.2% from the year-ago quarter.
Top-line growth was driven by 8.7% increase in revenues from Germany and 5.2% increase in Virgin Media revenues. Recently, Liberty launched its first gigabit broadband service powered by Docsis 3.1 technology in Bochum, Germany.
Acquisitions/Divestitures
Liberty now expects its previously announced sale of UPC Austria for €1.9 billion to TMobile Austria to close in the second half of 2018.
In March, the company also announced the termination of its planned purchase of Multimedia Polska.
Liberty also announced the divestiture of its operations in Germany, Hungary, Romania and the Czech Republic to Vodafone for a total enterprise value of approximately €19.0 billion ($22.7 billion).
Revenue Details
Residential cable revenues increased 2.8% year over year to $3.1 billion. Residential mobile revenues (including interconnect and handset sales) were $0.4 billion, up 4.5%.
Moreover, B2B revenues (including SOHO and non-subscription revenues) increased 12.4% from the year-ago quarter to $0.6 billion.
Liberty added 66K subscribers (organic RGUs) during the quarter, down 72.9% from the year-ago quarter due to lower net additions across most European operations. ARPU per cable customer relationships increased 15.2% to $46.04. On a rebased basis, growth was 1.3%.
U.K./Ireland RGU additions were almost 45K, down from 158K in the year-ago quarter. Revenues on a reported basis increased 18.3% year over year to $1.78 billion. On a rebased basis, revenues climbed 5.2%.
RGU attrition in Belgium was 22K, reflecting negative impacts of stiff competition. However, the company’s converged quad-play package additions continued to grow in the quarter. Liberty gained 30K new "WIGO" subscribers during the reported quarter.
Belgium revenues on a reported basis increased 15.1% year over year to $759.6 million. On a rebased basis, revenues decreased 1.3%.
Germany RGU additions were almost 29K, down from 52.4K in the year-ago quarter, primarily owing to higher video attrition. Moreover, broadband and fixed-line telephony net additions were impacted by churn from price increases implemented in the quarter.
Germany revenues on a reported basis surged 25.4% year over year to $782.8 million. On a rebased basis, revenues increased 8.7%.
Switzerland/Austria RGU attrition was almost 34.7K, primarily hurt by intensifying competition. Revenues on a reported basis increased 7.5% year over year to $454.6 million. On a rebased basis, revenues decreased 0.4%.
Central and Eastern Europe RGU additions were 48.7K, slightly better than 48.3K in the year-ago quarter. Revenues on a reported basis surged 22.2% year over year to $330.8 million. On a rebased basis, revenues increased 4.3%.
Liberty added 201K subscribers to its next-generation video platforms (including Horizon TV, Horizon-Lite, TiVo, Virgin TV V6 and Yelo TV) and reached 7.9 million or 45% of the company’s total cable video base (excluding DTH) by the end of the reported quarter.
Liberty also deployed 800K latest WiFi connect box. Its installed base reached almost 7.3 million or 48% of broadband subscribers across Europe.
In mobile, the company added 52K subscribers. Mobile ARPU (including interconnect revenues) on a reported basis, increased 7.2% to $18.33. On a rebased basis, the figure declined 2.6%.
Further, mobile ARPU (excluding interconnect revenues) on a reported basis increased 6.6% to $14.69. On a rebased basis, the figure declined 3.5%.
Operating Details
In the first quarter, programming and other direct costs of services soared 23.5% from the year-ago quarter to $1 billion.
Depreciation & amortization (D&A) expenses increased 14.9% to $1.29 billion. Selling, general & administrative (SG&A) expenses were $691.9 million, up 11.7% from the year-ago quarter.
Operating income increased 17.5% from the year-ago quarter to $493.1 million. However, operating margin contracted 10 basis points (bps) to 11.9%.
Segment operating cash flow (operating income after adjusted for non-cash items) increased 19.2% year over year to $1.89 billion.
U.K./Ireland operating cash flow (OCF) on a reported basis increased 18.6% year over year to $762.6 million. On a rebased basis, OCF increased 5.5%.
Belgium OCF on a reported basis increased 20.6% year over year to $357.6 million. On a rebased basis, OCF increased 2.5%.
Germany OCF on a reported basis surged 29.1% year over year to $492.1 million. On a rebased basis, OCF increased 11.8%.
Switzerland/Austria OCF on a reported basis declined 3.4% year over year to $243.5 million. On a rebased basis, OCF decreased 10.4%.
Finally, Central and Eastern Europe OCF on a reported basis surged 25.4% year over year to $139.1 million. On a rebased basis, OCF increased 6.3%.
Balance Sheet & Cash Flow
As of Mar 31, 2018, Liberty Global had $554.9 million cash and cash equivalents compared with $1.67 billion as of Dec 31, 2017.
Cash provided by operating activities were $1.28 billion, while free cash outflow was $625.1 million.
Liberty bought nearly $500 million of stock in the reported quarter. The company remains on track to repurchase a total of $2 billion this year.
2018 Guidance
Liberty Global expects to deliver approximately 5% rebased OCF growth. Adjusted free cash flow is estimated to be around $1.6 billion. Property and equipment additions are projected to be $5.1 billion for the full year. The investments highlight the company's customer-friendly attitude and bode well for its growth prospects.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.
Liberty Global PLC Price and Consensus
Liberty Global PLC Price and Consensus | Liberty Global PLC Quote
VGM Scores
At this time, LBTYA has a nice Growth Score of B, though it is lagging a bit on the momentum front with a C. The stock was also allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is more suitable for growth investors than those looking for value and momentum.
Outlook
LBTYA has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.